Previous researches focus on examining only the relation between cross-sectional earnings forecast dispersion and stock returns and on providing explanations for the negative dispersionreturn relation. This paper attempts to examine not only the relation between time-series forecast dispersion and stock returns, but also whether time-series and cross-sectional forecast dispersions contain systematic risk components, and whether such risk is priced in stock returns. We find that there is a strong positive relation between time-series forecast dispersion and stock returns. We also find that time-series forecast dispersion apparently contains systematic risk components and that such risk is priced in stock returns, while cross-sectional dispersion does not. In other words, dispersion in analysts' forecasts is informative intertemporally in terms of pricing ability but not cross-sectionally.
Keywords: Analysts' earnings forecasts; Cross-sectional forecast dispersion; Time-series forecast dispersion; Systematic risk components; Macroeconomic conditions
