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An Empirical Analysis of Analysts' Target Prices: Short‐term Informativeness and Long‐term Dynamics

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  • Alon Brav
  • Reuven Lehavy

Abstract

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.

Suggested Citation

  • Alon Brav & Reuven Lehavy, 2003. "An Empirical Analysis of Analysts' Target Prices: Short‐term Informativeness and Long‐term Dynamics," Journal of Finance, American Finance Association, vol. 58(5), pages 1933-1967, October.
    • Handle: RePEc:bla:jfinan:v:58:y:2003:i:5:p:1933-1967
    DOI: 10.1111/1540-6261.00593
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