Information Effects of Changes to Analysts' Recommendations PDF Download

Author: Paul J. Bolster
Publisher:
ISBN:
Category :
Languages : en
Pages : 31

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Book Description
We study the nature and impact of ratings changes for individual stocks provided to investors by Morningstar, Inc. Morningstar's recommendations follow negative momentum for upgrades and positive momentum for downgrades. When ratings change, upgraded stocks experience positive abnormal returns, while downgraded stocks experience negative abnormal returns. Morningstar recommendations not only impact stock prices at announcement, but statistically significant abnormal returns occur over the following 30 trading days. Additional variables tracked by Morningstar, such as economic moat and uncertainty, explain variation in abnormal returns associated with ratings change announcements. Overall, the results suggest that Morningstar analysts provide valuable information to investors.

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

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Book Description
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: Nadine Weber
Publisher: LAP Lambert Academic Publishing
ISBN: 9783844306927
Category :
Languages : en
Pages : 72

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Book Description
The Efficient Markets Hypothesis beholds that all public information is incorporated in the stock price. Yet economists question to what extent this holds, and these discussions are, among other factors, fuelled by the existence of analyst recommendations. If all information is already incorporated in the stock price, what value can analysts add? A comprehensive study on the German market finds that, indeed, a tangible effect is measured after analysts voice their recommendations; this effect is especially powerful when an analyst changes his recommendation to his previous one. Moreover, this book is the first to research how analyst recommendations have changed over time, whether analysts have better forecasting power during bull or bear markets, and, most importantly, how can an investor profit from this knowledge? An advanced calendar-time strategy has been developed wherein an investor can earn significant abnormal returns by following a momentum strategy in the short-term while simultaneously abiding to a contrarian strategy in the long-term.

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

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Book Description
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: Yasuyuki Fuchita
Publisher: Brookings Institution Press
ISBN: 0815729820
Category : Business & Economics
Languages : en
Pages : 216

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Book Description
A Brookings Institution Press and Nomura Institute of Capital Markets Research publication Developed country capital markets have devised a set of institutions and actors to help provide investors with timely and accurate information they need to make informed investment decisions. These actors have become known as "financial gatekeepers" and include auditors, financial analysts, and credit rating agencies. Corporate financial reporting scandals in the United States and elsewhere in recent years, however, have called into question the sufficiency of the legal framework governing these gatekeepers. Policymakers have since responded by imposing a series of new obligations, restrictions, and punishments—all with the purpose of strengthening investor confidence in these important actors. Financial Gatekeepers provides an in-depth look at these new frameworks, especially in the United States and Japan. How have they worked? Are further refinements appropriate? These are among the questions addressed in this timely and important volume. Contributors include Leslie Boni (University of New Mexico), Barry Bosworth (Brookings Institution), Tomoo Inoue (Seikei University), Zoe-Vonna Palmrose (University of Southern California), Frank Partnoy (University of San Diego School of Law), George Perry (Brookings Institution), Justin Pettit (UBS), Paul Stevens (Investment Company Institute), Peter Wallison (American Enterprise Institute).

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

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Book Description

Author: Roger K. Loh
Publisher:
ISBN:
Category : Stock price forecasting
Languages : en
Pages : 41

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Book Description
Not all stock recommendation changes are equal. In a sample constructed to minimize the impact of confounding news, relatively few analyst recommendation changes are influential in the sense that they impact investors' beliefs about a firm in a way that could be noticed in that firm's stock returns. More than one-third of the stock-price reactions to analyst recommendation changes have the wrong sign and only approximately 10% have significant stock-price reactions at the 5% level using an extended market model. We find that the probability of an influential recommendation is higher for leader analysts, star analysts, away-from-consensus revisions, revisions issued contemporaneously with earnings forecasts, analysts with greater relative experience, and those with more accurate earnings estimates. Growth firms, small firms, high institutional ownership firms, and high prior turnover firms are also more likely to have influential stock recommendations. Strikingly, analyst recommendations are more likely to be influential after Reg FD and the settlement. Finally, influential recommendations are associated with increases in stock volatility and large absolute changes in consensus earnings forecasts.

Author: Shuping Chen
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
This study examines recent regulatory and practitioner concerns that managers provide more (less) information to analysts with more (less) favorable stock recommendations. We examine the relative forecast accuracy of analysts before and after a recommendation issuance under the assumption that increases (decreases) to management-provided information will increase (decrease) analysts' relative forecast accuracy. We find that analysts issuing more favorable recommendations experience a greater increase in their relative forecast accuracy compared to analysts with less favorable recommendations. Additional tests on the change in frequency with which analysts issue forecasts independent of or in conjunction with other analysts after their recommendation change yield corroborating results. In addition, we find that the greater increase in relative accuracy for analysts with more favorable recommendations exists prior to the passage of Regulation FD but not after. The combined results are consistent with analysts receiving relatively more management-provided information following the issuance of more favorable recommendations.

Author: Dan Amiram
Publisher:
ISBN:
Category :
Languages : en
Pages : 46

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Book Description
We use analyst earnings forecasts as a setting to examine a fundamental question concerning the effect of a public information release on announcement-period information asymmetry. Prior literature documents an announcement-period increase in information asymmetry for earnings announcements and management forecasts. In contrast, we predict and document an announcement-period decrease in information asymmetry for analyst forecasts. This decrease in information asymmetry at announcement is more pronounced when forecasts have greater information content. Predictably, there is a longer-term decrease in information asymmetry after all three information release types. Although the directionally opposite effects between analyst forecasts and the other two information releases exist only temporarily during the short-window announcement period, our findings highlight key differences in announcement-period information asymmetry dynamics and provide evidence that supports extant disclosure theory. Our evidence demonstrates that the directional effect of an information release on information asymmetry at announcement depends on how the information interacts with prior information held by sophisticated and unsophisticated investors.

Author: Michael Souček
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
The purpose of this article is to examine the impact of analysts' recommendation downgrades, upgrades, and reiterations on German stock returns and as to whether prof- itable investment strategies could potentially be designed around these recommendations. The paper provides a unique detailed descriptive analysis of financial analysts' recommendations changes on German stock market over the last decade. First, we show that changes in recommendations yield significant positive (negative) abnormal gross returns for upgrades (downgrades), respectively. Reiterations, on the other hand, do not cause statistically significant stock market reactions. We show, that stock price reactions following recommendation revisions are strongest at the announcement day and last up to six months for upgrades and four month for downgrades. A bulk of market reactions, appears on the recommendation event date and shortly before so that investors must trade in a timely manner to profit from analyst recommendations. A one-day delayed reaction to the change in recommendations do not allow for significant abnormal returns for most of the recommendation shifts.