Do Analysts Cater to Investor Beliefs via Target Prices?

• Main Authors: Hsing-yu Tu, 凃星宇
• Other Authors: Cheng, Lee-Young
• Format: Others
• Language: en_US
• Published: 2010
• Online Access: http://ndltd.ncl.edu.tw/handle/22763471076410336711

碩士 === 國立中正大學 === 財務金融所 === 98 === This paper first described the existence of analyst target price bias. Among 8,256 analyst-company observations across five years, we found that only 51% of analysts’ targets were met sometime during the relevant period, and 26% were met at the end of the period. Analysts’ targets that were not touched were overshot by 16% during the relevant period and 51% at the end of the period. We then investigated whether or not analysts cater to investor beliefs through their targets. Results demonstrated that analysts do cater to investors via overshooting targets even after controlling market sentiment index, analyst and company characteristics, and year effect. Furthermore, results showed that foreign analysts distributed more biased target price compared to domestic peers. To summarize, this study extended the catering theory by applying it to analyst target price bias. We suggested the existence of analyst target price bias and connected it to the catering theory. Our results are unique compared with recent studies, because limited studies have covered the same topic as that discussed in this work.