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The disparity between long-term and short-term forecasted earnings growth

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  • Da, Zhi
  • Warachka, Mitch
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    Abstract

    We find the disparity between long-term and short-term analyst forecasted earnings growth is a robust predictor of future returns and long-term analyst forecast errors. After adjusting for industry characteristics, stocks whose long-term earnings growth forecasts are far above or far below their implied short-term forecasts for earnings growth have negative and positive subsequent risk-adjusted returns along with downward and upward revisions in long-term forecasted earnings growth, respectively. Additional results indicate that investor inattention toward firm-level changes in long-term earnings growth is responsible for these risk-adjusted returns.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 100 (2011)
    Issue (Month): 2 (May)
    Pages: 424-442

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    Handle: RePEc:eee:jfinec:v:100:y:2011:i:2:p:424-442

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Analyst forecasts Return predictability;

    References

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    Cited by:
    1. So, Eric C., 2013. "A new approach to predicting analyst forecast errors: Do investors overweight analyst forecasts?," Journal of Financial Economics, Elsevier, vol. 108(3), pages 615-640.

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