Publication Type
Conference Paper
Version
acceptedVersion
Publication Date
1-2010
Abstract
Long-term earnings expectations are critically important to stock price valuations. We identify relative optimism and relative pessimism in long-term analyst forecasts by comparing these forecasts with implied short-term earnings growth forecasts across rms within the same industry. Stocks with relatively optimistic and relatively pessimistic long-term analyst forecasts have negative and positive risk-adjusted returns, respectively. This return predictability depends critically on short-term forecasts since relative optimism and relative pessimism originate from the slow diffusion of information from short-term to long-term analyst forecasts. Our results indicate that market participants have limited attention regarding the long-term earnings implications of information.
Discipline
Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Finance
Publication
American Finance Association Annual Meeting, Atlanta, 3-5 January 2010
First Page
1
Last Page
36
City or Country
Atlanta, GA, USA
Citation
DA, Zhi and WARACHKA, Mitchell Craig.
Long-Term Earnings Growth Forecasts, Limited Attention, and Return Predictability. (2010). American Finance Association Annual Meeting, Atlanta, 3-5 January 2010. 1-36.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/1564
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.1107637
Comments
Also presented at Asian Finance Association International Conference Meeting 2008