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The Nexus between Analyst Forecast Dispersion and Expected Returns Surrounding Stock Market Crashes

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Author(s): Terence Tai-Leung Chong | Xiaolei Wang

Journal: Journal of Risk and Financial Management
ISSN 1911-8066

Volume: 2;
Issue: 1;
Start page: 75;
Date: 2009;
Original page

Keywords: Analyst forecast dispersion | Stock market crash | Fama-French three-factor model

ABSTRACT
The performance of analysts’ forecasts has attracted increasing attention in recent years. However, as yet, no empirical study has investigated the nexus between the analyst forecast dispersion (AFD) and excess returns surrounding stock market crashes in any depth. This paper attempts to fill this void by estimating a Fama-French model regression with AFD as a factor. Instead of an expected linear relationship, a nonlinear U-shape relationship between the AFD and excess returns is found.
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