The forecast dispersion anomaly revisited: Time-series forecast dispersion and the cross-section of stock returns

•There is a positive relation between time-series forecast dispersion and stock returns.•We find that time-series forecast dispersion contains systematic risk components.•Those risk components are priced in stock returns.•Our results are different from the previous negative relation.

Previous studies use cross-sectional forecast dispersion in examining the relation between forecast dispersion and future stock returns and report an anomalous negative dispersion-return relation. This paper examines how time-series forecast dispersion is distinct in the relation to stock returns from the negative dispersion-return relation. We find that contrary to the previously-known negative dispersion-return relation, 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.