Analysts’ extrapolative expectations in the cross-section

Andreas Oesinghaus

Journal of Economics and Business, 2024, vol. 130, issue C, No S014861952400016X

Abstract: This paper examines extrapolative patterns of analysts’ expectations in the cross-section of firms. Using analysts’ target prices, I estimate the degree of extrapolative weighting capturing the relative weight analysts place on recent versus distant realized returns when forming their price expectation. I show considerable levels of extrapolation in the overall sample and on firm level. Results suggest considerable cross-sectional variation of extrapolation with valuation difficulty having a positive impact on the degree of extrapolative weighting. Furthermore, I construct a time-series of the degree of extrapolative weighting and argue that its time-series variation is also explained by valuation difficulty.

Keywords: Financial Analysts; Expectation formation; Target Prices; Extrapolation in the time-series; Extrapolation in the cross-section (search for similar items in EconPapers)
JEL-codes: G02 G12 G14 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S014861952400016X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:130:y:2024:i:c:s014861952400016x

DOI: 10.1016/j.jeconbus.2024.106174

Access Statistics for this article

Journal of Economics and Business is currently edited by Emanuele Bajo and Moritz Ritter

More articles in Journal of Economics and Business from Elsevier
Bibliographic data for series maintained by Catherine Liu ().