The asymmetric mispricing information in analysts’ target prices

Abstract We study the mispricing information present in target prices of US and international analysts. hypothesize that asymmetry value-relevance managers supply to analysts, combined with incentives facing analysts curry favor managers, leads analyst-claimed undervaluation being more predictive future stock returns than overvaluation. Our empirical tests isolate by first removing analysts’ estimates cost equity from implied then separating find only predict (at 16 cents 18 on dollar) when claim undervaluation, not they also observe predicts strongly after firms experience low macro-driven valuation uncertainty is low.