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Analyst valuation and corporate value discovery

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  • Laih, Yih-Wenn
  • Lai, Hung-Neng
  • Li, Chun-An

Abstract

This paper examines firm-level valuations by financial analysts and by the market, using a traditional vector error-correction model (VECM) or threshold vector error-correction model (TVECM) to obtain the information shares of the two parties. While investors' valuations lead financial analysts' valuations in most firms, the reverse is not uncommon. A cross-sectional analysis reveals that analyst forecasts are more valuable for firms with less trading, less uncertainty, and weaker association between prices and earnings.

Suggested Citation

  • Laih, Yih-Wenn & Lai, Hung-Neng & Li, Chun-An, 2015. "Analyst valuation and corporate value discovery," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 235-248.
  • Handle: RePEc:eee:reveco:v:35:y:2015:i:c:p:235-248
    DOI: 10.1016/j.iref.2014.10.004
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    More about this item

    Keywords

    Analyst forecast; Valuation; Information shares; Residual income model;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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