This paper examines the ability of naive investor expectations
models to explain the higher returns to contrarian investment
strategies. Contrary to Lakonishok, Shleifer, and Vishny (1994),
we find no systematic evidence that stock prices reflect naive
extrapolation of past trends in earnings and sales growth.
Building on Bauman and Dowen (1988) and La Porta (1995), however,
we find that stock prices appear to naively reflect analysts'
biased forecasts of future earnings growth. Further, we find that
naive reliance on analysts' forecasts of future earnings growth
can explain over half of the higher returns to contrarian
investment strategies.
%0 Journal Article
%1 Dech-Sloa-1997
%A Dechow, Patricia M.
%A Sloan, Richard G.
%D 1997
%K imported
%N 1
%P 3-27
%T Returns to Contrarian Investment Strategies: Tests of Naive
Expectations Hypotheses
%V 43
%X This paper examines the ability of naive investor expectations
models to explain the higher returns to contrarian investment
strategies. Contrary to Lakonishok, Shleifer, and Vishny (1994),
we find no systematic evidence that stock prices reflect naive
extrapolation of past trends in earnings and sales growth.
Building on Bauman and Dowen (1988) and La Porta (1995), however,
we find that stock prices appear to naively reflect analysts'
biased forecasts of future earnings growth. Further, we find that
naive reliance on analysts' forecasts of future earnings growth
can explain over half of the higher returns to contrarian
investment strategies.
@article{Dech-Sloa-1997,
abstract = {This paper examines the ability of naive investor expectations
models to explain the higher returns to contrarian investment
strategies. Contrary to Lakonishok, Shleifer, and Vishny (1994),
we find no systematic evidence that stock prices reflect naive
extrapolation of past trends in earnings and sales growth.
Building on Bauman and Dowen (1988) and La Porta (1995), however,
we find that stock prices appear to naively reflect analysts'
biased forecasts of future earnings growth. Further, we find that
naive reliance on analysts' forecasts of future earnings growth
can explain over half of the higher returns to contrarian
investment strategies.},
added-at = {2006-07-21T20:00:04.000+0200},
author = {Dechow, Patricia M. and Sloan, Richard G.},
biburl = {https://www.bibsonomy.org/bibtex/2d282ec174494577335b5f9112b4d8710/deepgorge},
interhash = {109e7bc30d3252a0f1cc75580ead7eab},
intrahash = {d282ec174494577335b5f9112b4d8710},
keywords = {imported},
month = {1 January},
number = 1,
pages = {3-27},
timestamp = {2006-07-21T20:00:04.000+0200},
title = {Returns to Contrarian Investment Strategies: Tests of Naive
Expectations Hypotheses},
volume = 43,
year = 1997
}