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| Author: | Avramov, D. (et al.) |
| Title: | Dispersion in analysts' earnings forecasts and credit rating |
| Journal: | Journal of Financial Economics
2009 : JAN, VOL. 91:1, p. 83-101 |
| Index terms: | finance assets pricing credit rating earnings forecasting companies |
| Language: | eng |
| Abstract: | It is shown in this paper that the puzzling negative cross-sectional relation btw. dispersion in analysts' earnings forecasts and future stock returns may be explained by financial distress. Focusing on a sample of firms rated by Standard & Poor's (S&P), it is shown that the profitability of dispersion-based trading strategies concentrates in a small number of the worst-rated firms, being significant only during periods of deteriorating credit conditions etc. The results are robust to previously proposed explanations for the dispersion effect, e.g. short-sale constraints and leverage. |
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