Keywords
analyst forecast dispersion, future stock returns, differences in opinion
Abstract
We provide evidence that stocks with higher dispersion in analysts' earnings forecasts earn lower future returns than otherwise similar stocks. This effect is most pronounced in small stocks and stocks that have performed poorly over the past year. Interpreting dispersion in analysts' forecasts as a proxy for differences in opinion about a stock, we show that this evidence is consistent with the hypothesis that prices will reflect the optimistic view whenever investors with the lowest valuations do not trade. By contrast, our evidence is inconsistent with a view that dispersion in analysts' forecasts proxies for risk.
Original Publication Citation
Differences of Opinion and the Cross Section of Stock Returns, 2002, with Christopher Malloy and Anna Scherbina, Journal of Finance, 57, 2113–2141.
BYU ScholarsArchive Citation
Diether, Karl B.; Malloy, Christopher J.; and Scherbina, Anna, "Differences of Opinion and the Cross Section of Stock Returns" (2002). Faculty Publications. 9213.
https://scholarsarchive.byu.edu/facpub/9213
Document Type
Peer-Reviewed Article
Publication Date
2002
Publisher
Journal of Finance
Language
English
College
Marriott School of Business
Department
Finance
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