We provide new evidence on individual analysts' differential abilities to forecast firm value. We find that independent analysts' target prices perform well in predicting future price relative to investment-bank analysts. Our evidence suggests that, 12 months after issuance, independent analysts' target prices are more likely to be met than those issued by investment-bank analysts and are more accurate than the target prices of affiliated investment-bank analysts, controlling for analyst characteristics. However, we find that the association between realized returns and the returns predicted by target prices does not differ for independent versus investment-bank analysts. Our evidence contrasts with prior literature which generally concludes that independent analysts' research is of lower quality. Yet, the market appears to react relatively less strongly to independent analysts' target price revisions. Our findings suggest that investors and researchers can benefit from understanding the properties of independent analysts' target prices, particularly for certain types of firms.

JEL Classifications: G3; G17; M4; M41.

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