Analysts’ Earnings Forecast, Recommendation,
and Target Price Revisions

Abstract

This study examines the immediate and delayed market responses to revisions in analyst forecasts of earnings, target prices, and recommendations. Consistent with prior literature, revisions in earnings forecasts are positively and significantly associated with short-term market returns around the revisions. However, Feldman, Livnat, and Zhang show that short-term market returns around target price revisions and recommendation changes are even stronger. They also find superior future performance (return drift) for portfolios that use information from all three types of revisions to those using information from only one of the three types of revisions.