Stock analysts´ forecasting accuracy: still low - still a puzzle

Abstract

In this thesis, I investigate how accurate stock analysts’ target prices are and which factors investors could used to discern between accurate and inaccurate target prices ex ante. For this, I use a sample of 5062 target prices for Danish companies in the period 2007-2013. I use statistical tests to analyze just how accurate analysts’ target prices are and which impact five different variables have on said accuracy. My results show that analysts are considerably inaccurate. However, they are not positively biased, as previous literature suggests. Furthermore, my results indicate that it is very difficult for investors to distinguish between accurate and inaccurate target prices ex ante. I compare these findings with those of previous researchers and provide explanations for why my results are different. Lastly, I decipher which implications my findings have for investors.