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 |
Issue Date: | Apr-2017 | Source: | Management science, Apr. 2017, v. 63, no. 4, p. 1214-1231 | 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. | Keywords: | Disagreement Short-sale constraints Underreaction Cross section of stock returns |
Publisher: | Institute for Operations Research and the Management Sciences | Journal: | Management science | ISSN: | 0025-1909 | EISSN: | 1526-5501 | DOI: | 10.1287/mnsc.2015.2405 | Rights: | Copyright © 2016, INFORMS This is an Author Accepted Manuscript of an article published by INFORMS, available online: https://doi.org/10.1287/mnsc.2015.2405 |
| Appears in Collections: | Journal/Magazine Article |
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| a0801-n18_MS_Dispersion_PolyU.pdf | Pre-Published version | 844.14 kB | Adobe PDF | View/Open |
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