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Investor target prices

Author

Listed:
  • Huang, Shiyang
  • Liu, Xin
  • Yin, Chengxi

Abstract

We argue that investors have target prices as anchors for the stocks that they own; once a stock exceeds target prices, investors are satisfied and more likely to sell the stock. This increased selling can generate a price drift after good news. Consistent with our argument, using analyst-target-price forecasts as a proxy, we provide evidence that the fraction of satisfied investors generates the post-earnings-announcement drift, and stocks with a high fraction of satisfied investors experience stronger selling around announcements. This pattern is stronger for stocks with low institutional ownership and high uncertainty.

Suggested Citation

  • Huang, Shiyang & Liu, Xin & Yin, Chengxi, 2019. "Investor target prices," Journal of Empirical Finance, Elsevier, vol. 54(C), pages 39-57.
    • Handle: RePEc:eee:empfin:v:54:y:2019:i:c:p:39-57
    DOI: 10.1016/j.jempfin.2019.07.009
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    References listed on IDEAS

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    3. Chen, Xing & Diao, Xundi & Wu, Chongfeng, 2022. "Heterogeneous investor attention and post earnings announcement drift: Evidence from China," Economic Modelling, Elsevier, vol. 110(C).

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    More about this item

    Keywords

    Investor target price; Fraction of satisfied investors; Price drift; Forward-looking anchor; Delayed adjustment;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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