Target Price Accuracy: International Evidence

Abstract

Using an international sample of 16 countries, this paper examines if analyst- and country-specific characteristics explain the variation in target price (TP) accuracy. We find significant variation in average TP accuracy across countries that is due to differences in accounting disclosure quality, the origin of the legal system, cultural traits and IFRS regulation. We also find that analysts exhibit differential and persistent ability to forecast target prices accurately, which confirms that some analysts have superior TP forecasting ability.