The Disparity Between Long-Term and Short-Term Forecasted Earnings Growth
We find the disparity between long-term and short-term analyst forecasted earnings growth is a robust predictor of future returns and long-term analyst forecast errors. After adjusting for industry characteristics, stocks whose long-term earnings growth forecasts are far above or far below their implied short-term forecasts for earnings growth have negative and positive subsequent risk-adjusted returns along with downward and upward revisions in long-term forecasted earnings growth, respectively. Additional results indicate that investor inattention toward firm-level changes in long-term earnings growth is responsible for these risk-adjusted returns.
Analyst forecasts, Return predictability
Finance and Financial Management | Portfolio and Security Analysis
Journal of Financial Economics
WARACHKA, Mitchell Craig and Da, Z..
The Disparity Between Long-Term and Short-Term Forecasted Earnings Growth. (2011). Journal of Financial Economics. 100, (2), 424-442. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/3203