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The hot-growth companies: How well do analysts predict their performance?

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Listed:
  • Yu, Susana
  • Lord, Richard A.
  • Webb, Gwendolyn

Abstract

We assess several aspects of analysts' forecasting performance for stocks included in Business Week's annual list of 100 "hot-growth" companies. We find that analysts underestimate earnings before stocks are included in the list, and they tend to overestimate them afterward. However, analysts revise their earnings estimates downward after stocks are included in the list, and the largest downward revisions are followed by significant negative stock returns. We conclude that analysts correctly assess the diminished prospects of stocks designated as "hot-growth" companies and that their forecast revisions have significant predictive power and value.

Suggested Citation

  • Yu, Susana & Lord, Richard A. & Webb, Gwendolyn, 2010. "The hot-growth companies: How well do analysts predict their performance?," Journal of Economics and Business, Elsevier, vol. 62(3), pages 195-219, May.
    • Handle: RePEc:eee:jebusi:v:62:y::i:3:p:195-219
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    References listed on IDEAS

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