Information Content and Market Microstructure Effects of Analysts' Recommendations PDF Download

Author: Soc Tae Kim
Publisher:
ISBN:
Category : Investment analysis
Languages : en
Pages : 220

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Author: Susan D. Krische
Publisher:
ISBN:
Category :
Languages : en
Pages : 40

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We investigate the relation between analyst stock recommendations and eight concurrently available variables that have predictive power for stock returns. We find that analysts generally pay little attention to the large sample predictive attributes of these variables. In seven out of eight cases, analysts' stock recommendations are directionally opposite to the variable's normative usage in returns prediction. In general, analysts exhibit a strong bias in favor of glamour stocks with growth characteristics.Despite this general bias, analyst recommendations have incremental predictive power for future returns. In fact, after controlling for the other predictive variables, the predictive power of the level of the analyst recommendation increases. These findings suggest that analyst stock recommendations contain information that is largely orthogonal to the information in the other predictive variables. We discuss the implications of these results for analysts, and for investors who rely on their recommendations.

Author: Eurico J. Ferreira
Publisher:
ISBN:
Category :
Languages : en
Pages :

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A rich literature examines the effects of analysts' recommendations on stock prices, and literature is developing on the effect of Regulation Fair Disclosure on the information associated with corporate earnings forecasts and announcements. This study examines the effect of Reg FD on the information content of analysts' rating changes. Based on recommendations associated with a random sample of Samp;P 500 Index stocks, the major finding is that investors have been responding to analysts' recommendations in the same way since Reg FD as they did before implementation of Reg FD. In addition, the results suggest that Reg FD does not require that practitioners change the way they view the analyst recommendation process.

Author: Jing Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 29

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The vast majority of reports written by sell-side equity analysts conclude with a reiteration of the analyst's existing recommendation on a firm's stock. Yet there is a disproportionate amount of research that focuses on the market reactions of changes in recommendations and a prevailing sense that reiterations do not matter. In this paper, we test the hypothesis that reiterations of recommendations serve to resolve information uncertainty since the original recommendation was published and that they give rise to market reactions in the direction of the original recommendation, which we call a confirmation effect. Using a sample of analyst reports that do not contain any changes in recommendations, earnings forecasts, or price targets, we focus solely on reiterations and show that they are associated with proxies for information content, reductions in information uncertainty, and return reactions consistent with a confirmation effect.

Author: Joel Hasbrouck
Publisher: Oxford University Press
ISBN: 0198041306
Category : Business & Economics
Languages : en
Pages : 209

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The interactions that occur in securities markets are among the fastest, most information intensive, and most highly strategic of all economic phenomena. This book is about the institutions that have evolved to handle our trading needs, the economic forces that guide our strategies, and statistical methods of using and interpreting the vast amount of information that these markets produce. The book includes numerous exercises.

Author: Frédéric Abergel
Publisher: John Wiley & Sons
ISBN: 1119952786
Category : Business & Economics
Languages : en
Pages : 194

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The latest cutting-edge research on market microstructure Based on the December 2010 conference on market microstructure, organized with the help of the Institut Louis Bachelier, this guide brings together the leading thinkers to discuss this important field of modern finance. It provides readers with vital insight on the origin of the well-known anomalous "stylized facts" in financial prices series, namely heavy tails, volatility, and clustering, and illustrates their impact on the organization of markets, execution costs, price impact, organization liquidity in electronic markets, and other issues raised by high-frequency trading. World-class contributors cover topics including analysis of high-frequency data, statistics of high-frequency data, market impact, and optimal trading. This is a must-have guide for practitioners and academics in quantitative finance.

Author: Charles-albert Lehalle
Publisher: World Scientific
ISBN: 9813231149
Category : Business & Economics
Languages : en
Pages : 366

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Book Description
This book exposes and comments on the consequences of Reg NMS and MiFID on market microstructure. It covers changes in market design, electronic trading, and investor and trader behaviors. The emergence of high frequency trading and critical events like the'Flash Crash' of 2010 are also analyzed in depth.Using a quantitative viewpoint, this book explains how an attrition of liquidity and regulatory changes can impact the whole microstructure of financial markets. A mathematical Appendix details the quantitative tools and indicators used through the book, allowing the reader to go further independently.This book is written by practitioners and theoretical experts and covers practical aspects (like the optimal infrastructure needed to trade electronically in modern markets) and abstract analyses (like the use on entropy measurements to understand the progress of market fragmentation).As market microstructure is a recent academic field, students will benefit from the book's overview of the current state of microstructure and will use the Appendix to understand important methodologies. Policy makers and regulators will use this book to access theoretical analyses on real cases. For readers who are practitioners, this book delivers data analysis and basic processes like the designs of Smart Order Routing and trade scheduling algorithms.In this second edition, the authors have added a large section on orderbook dynamics, showing how liquidity can predict future price moves, and how High Frequency Traders can profit from it. The section on market impact has also been updated to show how buying or selling pressure moves prices not only for a few hours, but even for days, and how prices relax (or not) after a period of intense pressure.Further, this edition includes pages on Dark Pools, Circuit Breakers and added information outside of Equity Trading, because MiFID 2 is likely to push fixed income markets towards more electronification. The authors explore what is to be expected from this change in microstructure. The appendix has also been augmented to include the propagator models (for intraday price impact), a simple version of Kyle's model (1985) for daily market impact, and a more sophisticated optimal trading framework, to support the design of trading algorithms.

Author: Wanyi Yang
Publisher:
ISBN:
Category : Investment advisors
Languages : en
Pages : 386

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Book Description
This thesis comprises three separate empirical studies which examine different aspects of analyst stock recommendations in international stock markets. The first study focuses on the information content of analyst recommendations at the country level. It shows that analyst recommendations aggregated at the country level predict international stock market returns. A trading strategy based on country-level recommendations yields an abnormal return of around 1% per month. Additional tests indicate that analyst recommendations aggregated at the country level provide useful information to predict future aggregate cash flows and associated market returns across different countries. The second study shifts the focus towards the standard deviation of analyst recommendations. In particular, it takes a closer look at Miller's theory (1977) and tests whether the relationship between differences of opinion and stock returns exists at the country level. This study shows that country level disagreement measured from single stock recommendation dispersion is negatively related to future realized market returns. This study also provides evidence that growth stocks show a higher level of overpricing compared to value stocks. The aggregate difference of opinion remains significantly negatively related to market returns after allowing time-varying risk exposure. However, countries with more binding short-sales constraints do not show lower future market returns. Finally, the third study takes a broader perspective and investigates whether the short-term value impact of analyst recommendations varies across countries, and whether these differences are related to countries' institutional environments. The results show that stock price reactions are systematically different across countries. In particular, stock prices react significantly stronger to recommendation announcements in countries with higher accounting standards, more effective security enforcement, better earnings quality, common law origins, and better protection of private property. However, the enforcement of insider trading laws does not significantly affect the value of recommendations at the country level. The results are robust after extending the event window to (-15, +15) and excluding confounding earnings announcements. Moreover, the institutional environment affects the value of recommendation revisions across countries as well.

Author: Gilles Dufrénot
Publisher: Springer
ISBN: 3319052128
Category : Business & Economics
Languages : en
Pages : 322

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Book Description
This book discusses market microstructure environment within the context of the global financial crisis. In the first part, the market microstructure theory is recalled and the main microstructure models and hypotheses are discussed. The second part focuses on the main effects of the financial downturn through an examination of market microstructure dynamics. In particular, the effects of market imperfections and the limitations associated with microstructure models are discussed. Finally, the new regulations and recent developments for financial markets that aim to improve the market microstructure are discussed. Well-known experts on the subject contribute to the chapters in the book. A must-read for academic researchers, students and quantitative practitioners.

Author: Allan A. Zebedee
Publisher:
ISBN:
Category : Financial futures
Languages : en
Pages : 270

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