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

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

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    Article provided by Elsevier in its journal Journal of Economics and Business.

    Volume (Year): 62 (2010)
    Issue (Month): 3 (May)
    Pages: 195-219

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    Handle: RePEc:eee:jebusi:v:62:y::i:3:p:195-219
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    7. La Porta, Rafael, et al, 1997. " Good News for Value Stocks: Further Evidence on Market Efficiency," Journal of Finance, American Finance Association, vol. 52(2), pages 859-74, June.
    8. Abarbanell, Jeffery S., 1991. "Do analysts' earnings forecasts incorporate information in prior stock price changes?," Journal of Accounting and Economics, Elsevier, vol. 14(2), pages 147-165, June.
    9. Ronald C. Anderson & David M. Reeb, 2003. "Founding-Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1327, 06.
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