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Do Analysts' Price Targets Change Stock Prices? The Impact of Price Targets on Stocks with Different Characteristics.

Zelmin, Agneta Karin Elisabeth; Klamroth, Alexander
Master thesis
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Preliminary Thesis Report.pdf (283.8Kb)
URI
http://hdl.handle.net/11250/2577747
Date
2018
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  • Master of Science [1116]
Abstract
This thesis analyzes the impact of financial analysts’ price targets on stock

prices. According to the efficient market hypothesis, all information should be

incorporated in the stock price, meaning that financial analysts’ price targets

should not influence the stock price. Further, we investigate if volatility or

tangibility have an impact on the extend of the stock price changes. Using

the event study methodology, we analyze if any abnormal returns occur the

days surrounding the event date. We define an event as consensus stock price

target change of more than three percent. Our most important results are:

First, when a new price target is released, on average stock prices move in the

same direction as the analysts’ price targets. Second, downgrades lead to a

stronger price reaction than upgrades. Third, both tangibility and volatility

influence how strongly a stock responds to the price target. We see that

low volatile stocks and high tangible stocks respond to a lower degree than

their counterparts. Our paper also includes suggestions for further research on

this topic and concludes that financial analysts’ price targets do impact stock

prices.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2018
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Handelshøyskolen BI

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