Stock return predictability and the dispersion in earnings forecasts

Research output: Contribution to journalArticle

18 Citations (Scopus)

Abstract

Using monthly data for earnings forecasts by market analysts, this paper shows that the dispersion in forecasts has particularly strong predictive power for future aggregate stock returns at intermediate horizons. The results are robust (1) regardless of whether Newey-West or Hodrick corrected t-statistics are used, (2) when other forecasting or macroeconomic variables are included, (3) when different scaling variables are used for the dispersion measure, and (4) after correcting for finite sample biases. Furthermore, additional results suggest that the dispersion in analysts' forecasts can be interpreted as a measure of the differences in investors' expectations rather than the risk.

Original languageEnglish
Pages (from-to)2351-2375
Number of pages25
JournalJournal of Business
Volume78
Issue number6
DOIs
Publication statusPublished - 2005 Nov 1
Externally publishedYes

Fingerprint

Stock Returns
Predictability
Forecast
Macroeconomics
Forecasting
Horizon
Scaling
Statistics
Stock return predictability
Earnings forecasts

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

Cite this

Stock return predictability and the dispersion in earnings forecasts. / Park, Cheolbeom.

In: Journal of Business, Vol. 78, No. 6, 01.11.2005, p. 2351-2375.

Research output: Contribution to journalArticle

@article{88dbeee6788c4ef9a99dbba466b7e860,
title = "Stock return predictability and the dispersion in earnings forecasts",
abstract = "Using monthly data for earnings forecasts by market analysts, this paper shows that the dispersion in forecasts has particularly strong predictive power for future aggregate stock returns at intermediate horizons. The results are robust (1) regardless of whether Newey-West or Hodrick corrected t-statistics are used, (2) when other forecasting or macroeconomic variables are included, (3) when different scaling variables are used for the dispersion measure, and (4) after correcting for finite sample biases. Furthermore, additional results suggest that the dispersion in analysts' forecasts can be interpreted as a measure of the differences in investors' expectations rather than the risk.",
author = "Cheolbeom Park",
year = "2005",
month = "11",
day = "1",
doi = "10.1086/497047",
language = "English",
volume = "78",
pages = "2351--2375",
journal = "Journal of Business",
issn = "0021-9398",
publisher = "University of Chicago",
number = "6",

}

TY - JOUR

T1 - Stock return predictability and the dispersion in earnings forecasts

AU - Park, Cheolbeom

PY - 2005/11/1

Y1 - 2005/11/1

N2 - Using monthly data for earnings forecasts by market analysts, this paper shows that the dispersion in forecasts has particularly strong predictive power for future aggregate stock returns at intermediate horizons. The results are robust (1) regardless of whether Newey-West or Hodrick corrected t-statistics are used, (2) when other forecasting or macroeconomic variables are included, (3) when different scaling variables are used for the dispersion measure, and (4) after correcting for finite sample biases. Furthermore, additional results suggest that the dispersion in analysts' forecasts can be interpreted as a measure of the differences in investors' expectations rather than the risk.

AB - Using monthly data for earnings forecasts by market analysts, this paper shows that the dispersion in forecasts has particularly strong predictive power for future aggregate stock returns at intermediate horizons. The results are robust (1) regardless of whether Newey-West or Hodrick corrected t-statistics are used, (2) when other forecasting or macroeconomic variables are included, (3) when different scaling variables are used for the dispersion measure, and (4) after correcting for finite sample biases. Furthermore, additional results suggest that the dispersion in analysts' forecasts can be interpreted as a measure of the differences in investors' expectations rather than the risk.

UR - http://www.scopus.com/inward/record.url?scp=32144458055&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=32144458055&partnerID=8YFLogxK

U2 - 10.1086/497047

DO - 10.1086/497047

M3 - Article

AN - SCOPUS:32144458055

VL - 78

SP - 2351

EP - 2375

JO - Journal of Business

JF - Journal of Business

SN - 0021-9398

IS - 6

ER -