The Forecast Dispersion Anomaly Revisted: Time-Series Forecast Dispersion and the Cross-Section of Stock Returns

46 Pages Posted: 13 Aug 2014 Last revised: 18 Feb 2017

See all articles by Dongcheol Kim

Dongcheol Kim

Korea University Business School

Haejung Na

California State University, Los Angeles

Date Written: September 1, 2016

Abstract

Previous studies use cross-sectional forecast dispersion in examining the relation between forecast dispersion and future stock returns and report an anomalous negative dispersion-return relation. This paper examines how time-series forecast dispersion is distinct in the relation to stock returns from the negative dispersion-return relation. We find that contrary to the previously-known negative dispersion-return relation, there is a strong positive relation between time-series forecast dispersion and stock returns. We also find that time-series forecast dispersion apparently contains systematic risk components and that such risk is priced in stock returns.

Keywords: Time-series forecast dispersion; Cross-sectional forecast dispersion; Analysts' earnings forecasts; Systematic risk components; Idiosyncratic volatility; Macroeconomic conditions

JEL Classification: G12, G14

Suggested Citation

Kim, Dongcheol and Na, Haejung, The Forecast Dispersion Anomaly Revisted: Time-Series Forecast Dispersion and the Cross-Section of Stock Returns (September 1, 2016). Journal of Empirical Finance, Vol. 39, 2016, 27th Australasian Finance and Banking Conference 2014 Paper, Available at SSRN: https://ssrn.com/abstract=2478764 or http://dx.doi.org/10.2139/ssrn.2478764

Dongcheol Kim (Contact Author)

Korea University Business School ( email )

Anam-Dong, Seongbuk-Gu
Seoul 136-701, 136701
Korea
+82-2-3290-2606 (Phone)

Haejung Na

California State University, Los Angeles ( email )

5151 State University Dr.
Simpson Tower F316
Los Angeles, CA CA 90032
United States
323-343-2871 (Phone)

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