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We find the disparity between long-term and short-term analyst forecasted earnings growth is a robust predictor of future returns and long-term analyst forecast errors. After adjusting for industry characteristics, stocks whose long-term earnings growth forecasts are far above or far below their implied short-term forecasts for earnings growth have negative and positive subsequent risk-adjusted returns along with downward and upward revisions in long-term forecasted earnings growth, respectively. Additional results indicate that investor inattention toward firm-level changes in long-term earnings growth is responsible for these risk-adjusted returns.


This is an author-produced PDF of an article that later underwent peer review and was accepted for publication in Journal of Financial Economics, volume 100, issue 2, in 2011. The definitive publisher-authenticated version may differ from this one and is available online at

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