AN EXPLORATION OF EARNINGS WHISPERS FORECASTS AS PREDICTORS OF STOCK RETURNS

摘要

This paper provides evidence that stocks with higher differentials between whisper forecasts and analyst forecasts of earnings earn significantly lower future returns than those with low differentials. If differentials are considered to be proxies for heterogenous expectations of security prices, it follows that the higher the differential the greater the inaccuracy of prediction so that the higher the predicted market price relative to the true value of the stock the lower the future returns. The intuitive explanation for these results is provided by the Miller model which holds that an upward bias in stock prices results if optimists hold most of the stocks as rational investors are excluded from the market by high short-sale costs.