Earnings whisper forecasts as predictors of security returns: Support for the Miller Price optimism model

Author(s)

Rebecca Abraham, Nova Southeastern UniversityFollow
Charlie W. Harrington, Jr., Nova Southeastern UniversityFollow

ORCID

Rebecca Abraham 0000-0002-3144-7759

Document Type

Article

Publication Title

Journal of Business & Leadership

ISSN

1559-3355

Publication Date

2005

Abstract/Excerpt

This study provides empirical support for the Miller (1977) model which sets forth that security returns reflect the opinions of optimists in markets where more rational and pessimistic trading is excluded by high short-sale costs. Using the differential between earnings whisper forecasts and analysts' consensus forecasts as a proxy for heterogeneous expectations of earning, this study finds that for stacks with higher differentials, optimistic valuations dominate resulting in significantly lower future security returns than for stocks with lower differentials. Low differentials stacks are shown to resemble value stacks while high differential stocks display the characteristics of glamour stocks.

DOI

https://doi.org/10.58809/WCQQ6333

Volume

1

Issue

1

Document Number

2

First Page

1

Last Page

11

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

NSUWorks Citation

Abraham, Rebecca and Harrington, Jr., Charlie W., "Earnings whisper forecasts as predictors of security returns: Support for the Miller Price optimism model" (2005). HCBE Faculty Articles. 845.
https://nsuworks.nova.edu/hcbe_facarticles/845