The role of target price forecasts in attracting attention to stock recommendations

Kljaic, Tahnee (2015). The role of target price forecasts in attracting attention to stock recommendations Honours Thesis, School of Business, The University of Queensland.

       
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Author Kljaic, Tahnee
Thesis Title The role of target price forecasts in attracting attention to stock recommendations
School, Centre or Institute School of Business
Institution The University of Queensland
Publication date 2015
Thesis type Honours Thesis
Supervisor Irene Tutticci
Peter Clarkson
Total pages 110
Language eng
Subjects 1503 Business and Management
Formatted abstract
This thesis investigates the role of target price forecasts issued in conjunction with analyst stock recommendations in attracting investor attention to the recommendation. Given the skewness in the range of recommendation forecasts and the lack of variability in recommendations, this thesis questions whether the more granular target price forecast provides greater definition to the blunter tool, the recommendation. Measuring investor attention in respect of trading volume, it is hypothesised and found that the release of target price forecasts are significantly associated with abnormal trading volumes beyond that attributable to the standalone recommendation. The attention hypothesis theory provides an explanation for such stimulation of trading, whereby individual investors tend to invest in stocks that catch their attention. The results show that smaller firms experience higher abnormal trading volume in response to larger target price premiums, including target price premiums that breach a stock’s prior 52-week trading range. Given that individual investor interest tends to be higher in smaller stocks, the results inform the view that attention-driven buying by individual investors explains abnormal trading volumes surrounding the release of target price forecasts.

 
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Created: Wed, 23 Mar 2016, 08:51:01 EST by Susan Peeters on behalf of UQ Business School