As part of the series of the „Finance Research Seminar“, VGSF welcomes Erik Theissen from the University of Mannheim to present his research paper.
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Paper
Analyst Forecasts and Factor Risk Premiums
(joint with Daniel Weiß and Can Yilanci)
We use I/B/E/S analyst target price forecasts to construct estimates of expected returns. Using these expected returns in a variety of asset pricing tests, we find strong evidence that analysts price market, size, and value risk, in accordance with the Fama and French (1993) 3-factor model. However, we also find that analysts price profitability, investment, and momentum in a way opposite to what academic research (Fama and French, 2015; Hou et al., 2015; Carhart, 1997; Fama and French, 2018) suggests. In further tests we find that firm characteristics rather than factor loadings drive expected returns (similar to what Daniel and Titman (1997) found for realized returns), and we show that ESG ratings affect expected return estimates after, but not before the Paris agreement.
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