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Modelling analysts’ target price revisions following good and bad news?

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  • Tuan Q. Ho
  • Norman Strong
  • Martin Walker

Abstract

We study the relation between analysts’ target price revisions and recent market returns, excess stock returns, and other analysts’ target price revisions. Empirical results show that, after controlling for earnings forecast and recommendation revisions, target price revisions are associated with each of these information sources. We also find that target price revisions are more sensitive to negative than to positive excess stock returns. We conjecture that firms’ tendency to withhold bad news, while releasing good news promptly, drives this effect and, using proxies for firms’ withholding of bad news, we report evidence supporting this hypothesis.

Suggested Citation

  • Tuan Q. Ho & Norman Strong & Martin Walker, 2018. "Modelling analysts’ target price revisions following good and bad news?," Accounting and Business Research, Taylor & Francis Journals, vol. 48(1), pages 37-61, January.
    • Handle: RePEc:taf:acctbr:v:48:y:2018:i:1:p:37-61
    DOI: 10.1080/00014788.2016.1230485
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    Cited by:

    1. Khan, Muhammad Arif & Khan, Ashraf & Hassan, M. Kabir & Maraghini, Maria Pia, 2024. "Market response to environmental social and governance performance: A global analysis," Research in International Business and Finance, Elsevier, vol. 67(PA).
    2. Ertuğrul Karaçuha & Vasil Tabatadze & Kamil Karaçuha & Nisa Özge Önal & Esra Ergün, 2020. "Deep Assessment Methodology Using Fractional Calculus on Mathematical Modeling and Prediction of Gross Domestic Product per Capita of Countries," Mathematics, MDPI, vol. 8(4), pages 1-18, April.
    3. Evans Opoku‐Mensah & Yuming Yin & Sandra Chukwudumebi Obiora & Peter Adjei Darko, 2022. "Grabbing hand or helping hand? Ownership interventions and acquirers returns; the role of provincial idiosyncrasies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4797-4815, October.
    4. Markus Buxbaum & Wolfgang Schultze & Samuel L. Tiras, 2023. "Do analysts’ target prices stabilize the stock market?," Review of Quantitative Finance and Accounting, Springer, vol. 61(3), pages 763-816, October.
    5. Chlomou, Grigoria & Demirakos, Efthimios, 2020. "How do financial analysts implement the Sum-of-the-Parts (SOTP) valuation framework?," International Review of Financial Analysis, Elsevier, vol. 70(C).
    6. Peter Clarkson & Alexander Nekrasov & Andreas Simon & Irene Tutticci, 2020. "Target price forecasts: The roles of the 52‐week high price and recent investor sentiment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(9-10), pages 1365-1399, October.

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