Download or read book Determinants of Target Price Accuracy in Equity Research written by Bertram Bettac and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the impact of broker- and recommendation-specific factors on variations in target price accuracy. Using a sample of 2,273 target price revisions for SMI companies from 2010 to 2015, I find that target price forecasts are systematically biased with target price implied returns exceeding realized returns by an average of 17%. With regards to recommendation-specific factors, the size of the forecast error increases with the level of optimism an analyst exhibits via his target price forecast. This holds true even after adjusting for stock-specific risk differences. The systematic positive bias in target prices is reflected in the investment recommendation distribution with buy recommendations exceeding sell recommendations by a factor of six. Target price errors vary significantly between recommendation classes and target prices associated with sell recommendations are systematically more accurate than those associated with buy and hold recommendations. With regards to broker-specific factors, there is no conclusive evidence on differential forecasting abilities between highly ranked and unranked brokers as well as Swiss and foreign brokers.