Modelling analysts’ target price revisions following good and bad news?

Tuan Q. Ho*, Norman Strong, Martin Walker

*Corresponding author for this work

Research output: Contribution to journalArticle (Academic Journal)peer-review

6 Citations (Scopus)
314 Downloads (Pure)

Abstract

We study the relation between analysts’ target price revisions and recent market returns, excess stock returns, and other analysts’ target price revisions. Empirical results show that, after controlling for earnings forecast and recommendation revisions, target price revisions are associated with each of these information sources. We also find that target price revisions are more sensitive to negative than to positive excess stock returns. We conjecture that firms’ tendency to withhold bad news, while releasing good news promptly, drives this effect and, using proxies for firms’ withholding of bad news, we report evidence supporting this hypothesis.

Original languageEnglish
Pages (from-to)37-61
Number of pages25
JournalAccounting and Business Research
Volume48
Issue number1
Early online date5 Oct 2016
DOIs
Publication statusPublished - 2 Jan 2018

Keywords

  • excess stock returns
  • target price revisions
  • withholding bad news

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