Analyst Target Price Optimism around the World

• In Event: Financial Analysts II

Abstract

Using unique analyst location data for 11,633 analysts located in 45 countries covering 17,353 firms around the world, we construct both ex-ante and ex-post optimism measures to explore the factors that influence analyst target price optimism. We find that target price optimism is positively associated with proxies for analysts’ conflicts of interest, but negatively associated with country-level institutional infrastructure as characterised by strong investor protection, effective legal enforcement and transparent financial environment. Our results highlight the importance of institutional infrastructure of a country in disciplining analysts from biased research.

Authors

• Hongping Tan, University of Waterloo

• Mark T Bradshaw, Boston College

• Alan Guoming Huang, University of Waterloo