Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/70811
Title: Disagreement, underreaction, and stock returns
Authors: Cen, L
Wei, KCJ 
Yang, LY
Keywords: Disagreement
Short-sale constraints
Underreaction
Cross section of stock returns
Issue Date: 2017
Publisher: Institute for Operations Research and the Management Sciences
Source: Management science, 2017, v. 63, no. 4, p. 1214-1231 How to cite?
Journal: Management science 
Abstract: We explore analysts' earnings forecast data to improve on one popular disagreement measure-the analyst forecast dispersion measure-proposed by Diether et al. [Diether KB, Malloy CJ, Scherbina A (2002) Differences of opinion and the cross section of stock returns. J. Finance 57: 2113-2141]. Our analysis suggests that changes in the standard deviations of forecasted earnings can work as a complementary disagreement measure that is comparable across stocks and immune from other return-predictive information contained in the normalization scalars of analyst forecast dispersion measures. We also document evidence that the change-based disagreement measure predicts future cross-sectional returns significantly only when changes in the mean forecasts are negative. This finding suggests that the interaction between disagreement and underreaction to earnings news affects asset prices.
URI: http://hdl.handle.net/10397/70811
ISSN: 0025-1909
EISSN: 1526-5501
DOI: 10.1287/mnsc.2015.2405
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