Consensus Analysts Target Price and Stock Price Returns in Nigeria

Abstract

This study focuses on the effect of an Investment Valuation technique (Consensus Analysts Target Price) on Stock Price Return of listed companies in the Nigerian Exchange between the period of 2011 and 2023. The ex-post facto research design was employed in this research due to the use of historic (secondary) data from the selected fifteen (15) companies across 3 major sectors on the Nigeria Exchange (NGX). Panel autoregressive distribution lag model was the estimation techniques and inference made on 5% significance level. Prior to the data analysis, a number or pre-estimation test were carried out such as co-integration, homogeneity, and cross-sectional dependence in addition to basis correlation and descriptive analysis.  Findings from the short run reveals a significant negative coefficient (-0.273) for lagged Stock Price Return (L.STR), indicating a substantial short-term correction effect. Conversely, the lagged Consensus Analyst Target Price (L.CATP) shows a positive coefficient (0.141) without statistical significance, suggesting a modest positive relationship without an immediate impact on Stock Price Return. Transitioning to the long run, the highly significant negative coefficient (-1.273) for long-run Stock Price Return (lr_STR) emphasizes a robust and persistent negative adjustment effect. Over an extended period, Consensus Analyst Target Price (lr_CATP) introduces a marginally significant positive coefficient (0.077), implying a modest positive impact on Stock Price Return. Based on the results, one recommendation concerning Consensus Analyst Target Price (CATP) and Stock Price Return is to exercise caution in relying solely on CATP for short-term decision-making. Investors should be aware that, in the short term, deviations from the lagged return may not be significantly influenced by CATP. Therefore, considering additional factors or indicators alongside CATP could enhance the accuracy of short-term decision-making in understanding stock price movements.