Publication Type

Conference Paper

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

Additional URL

http://dx.doi.org/10.2139/ssrn.1107637

Comments

Also presented at Asian Finance Association International Conference Meeting 2008

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