Earnings Whisper Forecasts As Predictors of Security Returns: Support For The Miller Price Optimism Model

Authors

Rebecca Abraham, Nova Southeastern University
Charles Harrington, Nova Southeastern UniversityFollow

Abstract

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.

Volume

1

Issue

1

First Page

1

Last Page

11

DOI

10.58809/WCQQ6333

Comments

For questions contact ScholarsRepository@fhsu.edu

Rights

© Fort Hays State University

Creative Commons License

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

Recommended Citation

Abraham, Rebecca and Harrington, Charles (2005) "Earnings Whisper Forecasts As Predictors of Security Returns: Support For The Miller Price Optimism Model," Journal of Business & Leadership: Research, Practice, and Teaching (2005-2012): Vol. 1: No. 1, Article 2.
DOI: 10.58809/WCQQ6333
Available at: https://scholars.fhsu.edu/jbl/vol1/iss1/2