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By Brav A., Lehavy R.

Utilizing a wide database of analysts' goal costs issued over the interval 1997-1999, we learn temporary marketplace reactions to focus on expense revisions and long term comovement of objective and inventory prices.We ¢nd a signi¢cant marketplace response to the knowledge contained in analysts' aim costs, either unconditionally and conditional on contemporaneously issued inventory suggestion and profits forecast revisions. utilizing a cointegration method, we examine the long term habit of industry and goal prices.We ¢nd that, on general, the one-year-ahead goal cost is 28 percentage greater than the present industry expense.

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Speci¢cally, we examine downgrades from: (1) strong buy to hold, (2) strong buy to buy, and (3) buy to hold. 960). 239 vs. These results support an informative role for the magnitude of recommendation revisions, consistent with the interpretation that analysts employ the degree of the recommendation revision to convey their con¢dence in their target price estimate. References Asquith, Paul, Michael M. Mikhail, and Andrea Au, 2002, Equity analyst reports, Working paper, Duke University, Fuqua School of Business.

Our ¢ndings of a monotonic relation between abnormal returns and target price revisions, controlling for earnings forecast revisions, is consistent with the view that market participants view the magnitude of the multiple used by the analyst as informative. Second, the evidence that target price revisions contain information regarding future abnormal returns is important and consistent with either market underreaction due to investor behavioral biases or rational learning in the face of structural uncertainty (Brav and Heaton (2002)).

O’Brien, 1997, Self-selection and analyst coverage, Journal of Accounting Research 35, 167^208. Michaely, Roni, and Kent Womack, 1999, Con£ict of interest and the credibility of underwriter analyst recommendations, Review of Financial Studies 12, 653 ^686. Mitchell, L. Mark, and Erik Sta¡ord, 2000, Managerial decisions and long-term stock price performance, Journal of Business 73, 287^329. , 2001, Analysts take stock-price targets down from a walk on the moon,Wall Street Journal, Feb. 20, 1. Pastor, Lubos, and Robert F.

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An Empirical Analysis of Analysts’ Target Prices: Short-term Informativeness and Long-term Dynamics by Brav A., Lehavy R.

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