An Empirical Analysis of Analysts' Target Prices: Short‐term Informativeness and Long‐term Dynamics
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- Author(s): Alon Brav, Reuven Lehavy
- Published: Sep 11, 2003
- Pages: 1933-1968
- DOI: 10.1111/1540-6261.00593
Using a large database of analysts' target prices issued over the period 1997–1999, we examine short‐term market reactions to target price revisions and long‐term comovement of target and stock prices. We find a significant market reaction to the information contained in analysts' target prices, both unconditionally and conditional on contemporaneously issued stock recommendation and earnings forecast revisions. Using a cointegration approach, we analyze the long‐term behavior of market and target prices. We find that, on average, the one‐year‐ahead target price is 28 percent higher than the current market price.