Do Sell-Side Analysts Exhibit Differential Target Price Forecasting Ability?

Bradshaw, Mark T.; Brown, Lawrence D.; Huang, Kelly

doi:10.2139/ssrn.698581

Cited by 68 publications

(128 citation statements)

References 48 publications

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“…This information is taken from Brav and Lehavy (2003). Other studies from Asquith, Mikhail, and Au (2005), Gleason,Johnson,and Li (200), and Bradshaw and Brown (2006) similarly showed that target price availability started in 1997. Nevertheless, via target prices (in relation to current stock prices) analysts can disclose more detailed information concerning their view of the covered company, compared to simply disclosing recommendation levels.…”

Section: Introductionmentioning

confidence: 99%

Target Price Accuracy

Kerl

2011

Bus Res

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This study analyzes the accuracy of forecasted target prices within analysts’ reports. We compute a measure for target price forecast accuracy that evaluates the ability of analysts to exactly forecast the exante (unknown) 12-month stock price. Furthermore, we determine factors that explain this accuracy. Target price accuracy is negatively related to analyst-specific optimism and stock-specific risk (measured by volatility and price-to-book ratio). However, target price accuracy is positively related to the level of detail of each report, company size and the reputation of the investment bank. The potential conflicts of interests between an analyst and a covered company do not bias forecast accuracy.

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Section: Introductionmentioning

confidence: 99%

Target Price Accuracy

Kerl

2011

Bus Res

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“…The second definition is whether real price exceeds the target price even once during the forecasting period. Thirdly, it is measured by error ratio between actual price and target price at the end of forecasting period (Asquith et al, 2005;Bradshaw and Brown, 2006;Bonini et al, 2010;Kim, Jeon and Lee, 2010).…”

Section: Methodsmentioning

confidence: 99%

“…The first stream is the studies on analysts' ability to estimate earnings (Mikhail et al, 1997;Clement, 1999;Jacob et al, 1999) or their influence on stock price (Brav and Lehavy, 2003;Bradshaw and Brown, 2006). Unlike international studies, Korean studies, usually in the same study, generally deal with both the ability to forecast earnings and the ability to influence the stock price.…”

Section: A Reviewmentioning

confidence: 99%

Market Valuation of Technology Firms in KOSDAQ

Cho¹,

Seol²

2014

KTIS

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This study aims to analyze the valuation of technology firms in the stock market to answer how before-market entities should be valuated. This study analyzes 230 market reports of 2012 for technology firms in the KOSDAQ under several hypotheses. The results are as follows: 90% used the 3 multiples methods consisting of PER multiples with 80%, PBR multiples 8.7% and EBITDA multiples 1.7%. The average of PER multiples was 15 with the range of 6.9 to 83. That of PBR multiples is 2.27. Forecasting for cash flow is not applied over 4 years, but mainly 2-3 years. The accuracy of forecasting was 18.8%, 34.4% and 8% according to the different definitions. No differences were found in the accuracy of forecasting between valuation methods, between the industries having more intangible assets and the industries having less, and between startups and general companies and between ages and listed ages.

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“…The accuracy of recommendations has been examined either over the entire duration of their validity, or in the final moment of their validity, or after a specified period from the date of issue. For example, in a study conducted on the U.S. market, Asquith, Mikhail, and Au (2005) obtain a 54% level of accuracy of recommendations in the 12 months following their release, while Bradshaw, Brown, and Huang (2013) find levels of 64% for comparisons carried out throughout the entire duration of recommendations but only 38% at the end of the period of validity.…”

Section: The Effectiveness Of Stock Recommendationsmentioning

confidence: 99%

The accuracy of alternative stock valuation methods – the case of the Warsaw Stock Exchange

Prusak

2017

Economic Research-Ekonomska Istraživanja

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The main aim of this article is to examine the accuracy of different methods of share valuation used by Polish analysts in reports prepared in order to issue recommendations for companies listed on the Warsaw Stock Exchange. In the literature on the subject, the view which prevails is that the more sophisticated methods, i.e. those taking into account the discounting process, are characterised by higher valuation accuracy. However, the results of the present analysis show that Polish analysts achieve more accurate valuations using the market approach than the DCF model. Nevertheless, the highest level of accuracy is achieved by the target price, which in most cases is the value of the weighted average of valuations obtained via a market valuation and discounting methods. In terms of the multiples which are taken into account in this research, the highest accuracy is achieved with the use of EV/EBIT, although there are no statistically significant differences between the valuations calculated using this multiple and the results obtained with the P/E and EV/EBITDA multiples. Valuations prepared with the use of individual multiples usually generate greater errors compared to the DCF model and the market approach, which uses the weighted average of the valuations achieved with individual multiples.

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Do Sell-Side Analysts Exhibit Differential Target Price Forecasting Ability?

Cited by 68 publications

References 48 publications

Target Price Accuracy

Target Price Accuracy

Market Valuation of Technology Firms in KOSDAQ

The accuracy of alternative stock valuation methods – the case of the Warsaw Stock Exchange

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