Download or read book Does the Share Price Anomaly Explain the Market's Apparent Under-Weighting of Financial Analysts' Earnings Forecasts? written by Pieter T. Elgers and published by . This book was released on 2003 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper re-examines recent evidence of securities market mispricing that is associated with share-price scaled measures of financial analysts' earnings forecasts reported in Elgers, et al. (2001). The paper is motivated by inferences in Brown and Pfeiffer (2002) that a well known quot;share price anomaly,quot; which entails substantial unconditional abnormal returns to share price, subsumes the evidence in Elgers, et al. (2001) of delayed securities returns associated with early-in-the-year price-scaled analysts' earnings forecasts. We find that the evidence of market mispricing reported in Elgers, et al. (2001) is robust to the incorporation of appropriate control for abnormal returns to share prices. Moreover, for firm-years with lower analyst coverage, both the analysts' forecasts and share prices have significant incremental relations to size-adjusted returns. These findings indicate that the share price anomaly does not underlie the market's under-weighting of financial analysts' forecasts. Rather, the share-price anomaly and the delayed returns to analysts' forecasts are distinct sources of abnormal returns, and are complementary rather than redundant inputs to a profitable hedge portfolio trading strategy, for firms with lower analyst coverage.