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The market versus the analyst: Biases and predictive ability

  • Carter, Richard B.
  • Strader, Troy J.
Registered author(s):

    Using the end of the quiet period (QPX) after an IPO as a venue for testing, we examine the long-run predictive ability of analysts and the market. Not only do we find that the analysts are reasonably good at predicting returns for at least a year, we also find that the market in general is at least as good--even after adjusting for the analysts' recommendations. Separating the QPX market reaction into retail-dominated versus institutional-dominated - based on trade size - we find consistent evidence that only institutional-dominated reactions are positively related to longer-run return. When we examine 5-year survival prediction, we again find that only the institutional-dominated QPX reaction is positively related to survivability. There was no evidence that analysts were able to predict 5 years survival.

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    File URL: http://www.sciencedirect.com/science/article/B6W5X-4S6P25V-1/2/b764a9274bdf52e1b99fab7030ed0b96
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    Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

    Volume (Year): 49 (2009)
    Issue (Month): 2 (May)
    Pages: 398-416

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    Handle: RePEc:eee:quaeco:v:49:y:2009:i:2:p:398-416
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620167

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