Expectations and the Cross-Section of Stock Returns.
Previous research has shown that stocks with low prices relative to book value, cash flow, earnings, or dividends (that is, value stocks) earn high returns. Value stocks may earn high returns because they are more risky. Alternatively, systematic errors in expectations may explain the high returns earned by value stocks. The author tests for the existence of systematic errors using survey data on forecasts by stock market analysts. He shows that investment strategies that seek to exploit errors in analysts' forecasts earn superior returns because expectations about future growth in earnings are too extreme. Copyright 1996 by American Finance Association.
Year of publication: |
1996
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Authors: | La Porta, Rafael |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 51.1996, 5, p. 1715-42
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Publisher: |
American Finance Association - AFA |
Saved in:
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