Dispersion of analysts' expectations and the cross-section of stock returns

Bokhyeon Baik, Cheolbeom Park

Research output: Contribution to journalArticle

5 Citations (Scopus)

Abstract

Empirical evidence is presented to show that the dispersion in analysts' forecasts can explain part of the differences in cross-sectional stock returns. Generally, high dispersion stocks show relatively lower future returns than low dispersion stocks, and the difference in performance is statistically significant. Furthermore, the negative relation between stock returns and dispersions continues to hold even after controlling for size, book-to-market ratio and earnings-price ratio. This empirical fact is consistent with the earlier model of Harrison and Kreps, and demonstrates that investors are exploiting their awareness of heterogeneity in expectations in order to pursue resale gains.

Original languageEnglish
Pages (from-to)829-839
Number of pages11
JournalApplied Financial Economics
Volume13
Issue number11
DOIs
Publication statusPublished - 2003 Nov 1
Externally publishedYes

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cross section
investor
market
performance
evidence
Analysts
Cross-section of stock returns
Stock returns

ASJC Scopus subject areas

  • Geography, Planning and Development

Cite this

Dispersion of analysts' expectations and the cross-section of stock returns. / Baik, Bokhyeon; Park, Cheolbeom.

In: Applied Financial Economics, Vol. 13, No. 11, 01.11.2003, p. 829-839.

Research output: Contribution to journalArticle

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