Analysts' target price accurancy and investors' reaction: chilean stock market evidence

Abstract

The main purpose of this study is to estimate the target price accuracy (TPA) of the Chilean analysts and to find the factors that may affect its accuracy. We also seek to determine if there exists a direct relationship between the precision level of the research divisions and abnormal returns when a new target price (TP) is issued. The empirical results indicate that 26.2% of TPs (overall) issued were successful. Abnormal returns associated to research divisions with higher accuracy are not observed consistently. Lastly, we find significant abnormal returns when a new TP announced is above (below) to the market consensus.