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  • Article
  • Open Access
  • Published: 28 February 2014

Target Price Accuracy

  • Alexander G. Kerl1 

Business Research volume 4, pages 74–96 (2011)Cite this article

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Abstract

This study analyzes the accuracy of forecasted target prices within analysts’ reports. We compute a measure for target price forecast accuracy that evaluates the ability of analysts to exactly forecast the exante (unknown) 12-month stock price. Furthermore, we determine factors that explain this accuracy. Target price accuracy is negatively related to analyst-specific optimism and stock-specific risk (measured by volatility and price-to-book ratio). However, target price accuracy is positively related to the level of detail of each report, company size and the reputation of the investment bank. The potential conflicts of interests between an analyst and a covered company do not bias forecast accuracy.

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Authors and Affiliations

  1. University of Giessen, Germany

    Alexander G. Kerl (Assistant Professor of Financial Services)

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  1. Alexander G. Kerl
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Correspondence to Alexander G. Kerl.

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Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (https://creativecommons.org/licenses/by/4.0), which permits use, duplication, adaptation, distribution, and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

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Cite this article

Kerl, A.G. Target Price Accuracy. Bus Res 4, 74–96 (2011). https://doi.org/10.1007/BF03342727

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  • Revised: 21 June 2010

  • Accepted: 19 January 2011

  • Published: 28 February 2014

  • Issue Date: March 2011

  • DOI: https://doi.org/10.1007/BF03342727

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Keywords

  • target prices
  • forecast accuracy
  • financial report
  • security analysis
  • efficient capital markets
  • financial analysts
  • conflicts of interest
  • analyst report
  • equity analysis
  • forecast deviation
  • information content
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