Lönsamheten av analytikers riktpris - En studie av svenska bolag handlade på Stockholmsbörsen
We acknowledge the lack of empirical studies of the performance of analyst target prices in the Swedish stock market by examining the profitability of target prices for stocks publicly traded on the Stockholm Stock Exchange. We use consensus target prices issued between 2006-2010 and create two different strategies to observe the abnormal returns generated during this period. Going long in the top decile stocks with the best target prices and going short in the bottom decile stocks with the worst target prices generates a statistically significant abnormal buy-and-hold return of 8.9%. An active strategy with daily portfolio rebalancing and a timely response to target price changes generates a less significant monthly alpha of 1.4% against CAPM. The results show to be robust against the size effect discovered by Fama and French. High portfolio turnover might impair the observed abnormal returns, although not completely. We conclude that analysts have a relative good stock-picking ability but worse market timing overall. Hence, an investor can indeed profit from our strategies and outperform the market. However, our study is not perfect and can be subject to improvements in the method and the results should be confirmed using another sample data for the Swedish stock market.