The Usefulness Of Analysts Recommendations
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| Author | : Vinesh Jha |
| Publisher | : |
| Total Pages | : |
| Release | : 2019 |
| Genre | : |
| ISBN | : |
There are several noteworthy findings here about the usefulness of analysts' buy recommendations in investment decisions. First, recommendations add more value when they are consistent with other signals than when they are inconsistent. Second, other signals, such as earnings revisions and price momentum, add more value when they are consistent with recommendations than when they are inconsistent. Third, recommendations add more value in down markets than in up markets. Finally, recommendations add more value for small-cap stocks than for large-cap stocks. The implications of these results are that recommendation data are more useful 1) when they are corroborated by other signals; 2) when more judgment is needed to distinguish between “good” and “bad” stocks; and 3) for stocks that are less informationally efficient.
| Author | : Sundaresh Ramnath |
| Publisher | : Now Publishers Inc |
| Total Pages | : 125 |
| Release | : 2008 |
| Genre | : Business & Economics |
| ISBN | : 1601981627 |
Financial Analysts' Forecasts and Stock Recommendations reviews research related to the role of financial analysts in the allocation of resources in capital markets. The authors provide an organized look at the literature, with particular attention to important questions that remain open for further research. They focus research related to analysts' decision processes and the usefulness of their forecasts and stock recommendations. Some of the major surveys were published in the early 1990's and since then no less than 250 papers related to financial analysts have appeared in the nine major research journals that we used to launch our review of the literature. The research has evolved from descriptions of the statistical properties of analysts' forecasts to investigations of the incentives and decision processes that give rise to those properties. However, in spite of this broader focus, much of analysts' decision processes and the market's mechanism of drawing a useful consensus from the combination of individual analysts' decisions remain hidden in a black box. What do we know about the relevant valuation metrics and the mechanism by which analysts and investors translate forecasts into present equity values? What do we know about the heuristics relied upon by analysts and the market and the appropriateness of their use? Financial Analysts' Forecasts and Stock Recommendations examines these and other questions and concludes by highlighting area for future research.
| Author | : James Valentine |
| Publisher | : McGraw Hill Professional |
| Total Pages | : 465 |
| Release | : 2011-01-07 |
| Genre | : Business & Economics |
| ISBN | : 0071736395 |
The first real-world guide for training equity research analysts—from a Morgan Stanley veteran Addresses the dearth of practical training materials for research analysts in the U.S. and globally Valentine managed a department of 70 analysts and 100 associates at Morgan Stanley and developed new programs for over 500 employees around the globe He will promote the book through his company's extensive outreach capabilities
| Author | : Thomas F. Lewis (Jr.) |
| Publisher | : |
| Total Pages | : 64 |
| Release | : 2017 |
| Genre | : Accounting |
| ISBN | : |
This study investigates the extent to which sell-side analysts make full use of available financial and nonfinancial information signals in formulating stock recommendations. Prior research shows that investors rely strongly on sell-side analysts' recommendations and that sell-side analysts pay considerable attention to nonfinancial measures in making their decisions. However, prior research has primarily focused on the mere presence of nonfinancial measures and not the extent to which the direction of such measures (i.e. favorability) is associated with firm value, or assessed the extent to which any interaction between financial measures and the direction of nonfinancial measures may influence analysts in formulating stock recommendations. Using a data set hand-collected from annual proxy statements, I use ordered logistic regression analysis to provide a multivariate test of the relation between sell-side analyst recommendations, financial and context-specific nonfinancial measures. I find that analysts do incorporate the direction (favorability) of nonfinancial measures in formulating stock recommendations and that unfavorable nonfinancial measures attenuate positive financial information.
| Author | : Ran Barniv |
| Publisher | : |
| Total Pages | : 51 |
| Release | : 2010 |
| Genre | : |
| ISBN | : |
This is the first large study to examine the relation between analysts' stock recommendations, earnings forecasts, and future excess stock returns in an international context. We first document that some of the peculiar findings established in the U.S. extend to other countries where individual investor participation in the stock market is high (especially when Japan is excluded from the sample). Specifically, we find that analysts' recommendations relate positively to simple heuristics but negatively to more rigorous residual income valuation estimates (scaled by price). Furthermore, residual income valuation estimates relate positively to future returns, indicating their usefulness to investors, while analysts' recommendations and heuristics relate negatively to future stock returns. In contrast, in countries with low investor participation rates, these peculiar findings are less observable. In these countries, analysts appear to rely relatively more on residual income valuation estimates in setting their recommendations, and these recommendations relate positively to future returns. The overall results are consistent with analysts' recommendations being influenced by economic incentives other than identifying mispriced stocks in countries with high investor participation rates, substantiating puzzling results in the U.S.
| Author | : Eric Shkolnik |
| Publisher | : McGraw Hill Professional |
| Total Pages | : 241 |
| Release | : 2002-09-22 |
| Genre | : Business & Economics |
| ISBN | : 0071415653 |
Proven strategies for knowing which stock analysts to believe, which to ignoreand when to sell Investors are tired of losing money to the bad calls and noncalls of Wall Street analysts, especially on the heels of Enron and other "surprise" stock meltdowns. Instead of giving up, When Buy Means Sell presents an innovative, market-tested system for knowing which recommendations to trust, sniffing out conflicts of interest, and making buy and sell decisions based on valuable, impartial information. The first fresh approach to this age-old problem, When Buy Means Sell shows investors how to make sense ofand profit fromwhat Wall Street analysts are really saying, by revealing: Who the real prophets arefrom individual stars to leading firms How to read analyst calls like an insider Where to find the truly valuable information
| Author | : Jian Cao |
| Publisher | : |
| Total Pages | : 156 |
| Release | : 2007 |
| Genre | : Investment analysis |
| ISBN | : |
Prior research suggests that sell-side analysts are, on average, biased toward issuing overly optimistic "Buy" recommendations that may not accurately reflect their opinions about the values of the firms they follow. Given the widely-held claim about analyst bias, I construct a measure of analyst recommendation optimism based on both the favorableness and valuation relevance of a stock recommendation. Applying the optimism measure to a sample of the I/B/E/S detailed recommendation and forecast database over the period 1994-2004, I examine whether and how the characteristics of individual analyst are important to investors' education about the underlying bias and value in analysts' recommendations. I find that analysts who embody superior research attributes are less likely to provide overly optimistic recommendations deviating from fundamental valuations. I also show that investors do not recognize the full extent of the bias and investors, conscious of the low credibility of buy recommendations, rely on individual characteristics of analysts when evaluating the related bias. Finally, the evidence suggests that recent regulations on analysts' conflicts-of-interest and qualification have enhanced the role of analyst characteristics in mitigating recommendation bias and the ability of investors to recognize the extent of the bias. The findings should have broad implications for investors, legislators, and security regulators. While Congress, regulators, and security exchanges have taken several steps to reinstill public confidence in the objectivity of analyst research, investor education is particularly vital to managing analyst risk. Evidence on how analysts incorporate their private valuations into the issued opinions could potentially assist investors in gauging the nature and value of stock recommendations and managing the related risk when they follow individual analysts' advice.
| Author | : Malwina Woznik |
| Publisher | : GRIN Verlag |
| Total Pages | : 38 |
| Release | : 2013-08-12 |
| Genre | : Business & Economics |
| ISBN | : 3656478236 |
Seminar paper from the year 2011 in the subject Business economics - Controlling, grade: 1,3, University of Cologne (Seminar für allgemeine BWL und Controlling), language: English, abstract: Since the beginning of the 90s research on issues referring to analysts’ practise grew rapidly to such an extent that even several publications are concerned with giving an overview of this development. Besides the principal-agent problematic between the firm’s managers and the equity investors, investors are dependent on analysts’ information in times where equity trading soared and the trading turnover in 2008 was 35 times higher than in 1980. That is why shareholders are not able to analyse the amount of information regarding a company due to lack of time or ability. Therefore analysts advise investors to make a profitable decision by publishing a report including for instance stock recommendations or earnings forecasts. Another reason why there is so much research about analysts’ practise is the fact that their information influences investors’ trading behaviour. Thus, it is crucial to know how reliable those statements are and accordingly to be able to assess the quality of the outputs. However, to answer the question of analysts’ process of transforming various information of stock recommendations have to be examined in detail. Recent investigations rather focus on the single properties of analysts’ analyses as earnings forecasts and stock recommendations, but did not connect those two values. Prior studies deal with research questions like the effect of earnings forecasts on the stock prices or the use of stock recommendations to foretell abnormal return. Bradshaw (2004) is the first research paper which follows the question whether there is a link and if so how analysts incorporate the earnings forecasts into their stock recommendation. Because of the importance of Bradshaw (2004), this paper reviews the main issues and embeds them into the existing literature concerning the role of analysts. The rest of this paper is organized as follows. The first chapter focuses on the character of analysts and potential key input factors which might be used by analysts for issuing recommendations. Then a brief review of Bradshaw (2004) is given to present the main results. This enables a discussion about potential and realized extensions in literature which follows in the third chapter. The final chapter concludes.
| Author | : Tanja Klettke |
| Publisher | : Springer Science & Business |
| Total Pages | : 120 |
| Release | : 2014-04-28 |
| Genre | : Business & Economics |
| ISBN | : 3658056347 |
Financial analysts provide information in their research reports and thereby help forming expectations of a firm’s future business performance. Thus, it is essential to recognize analysts who provide the most precise forecasts and the accounting literature identifies characteristics that help finding the most accurate analysts. Tanja Klettke detects new relationships and identifies two new determinants of earnings forecast accuracy. These new determinants are an analyst’s “general forecast effort” and the “number of supplementary forecasts”. Within two comprehensive empirical investigations she proves these measures’ power to explain accuracy differences. Tanja Klettke’s research helps investors and researchers to identify more accurate earnings forecasts.
| Author | : Maxwell Dawson |
| Publisher | : |
| Total Pages | : 32 |
| Release | : 2020 |
| Genre | : Investment analysis |
| ISBN | : |
This paper lies at the convergence of the portfolio optimization literature and the equity research industry. I attempt to quantify the benefit provided to an investor by equity analysts from an asset allocation perspective, and hypothesize that no significant benefit exists because of the incentive misalignments facing analysts as well as the inherent difficulty of valuing stocks. Using a Bayesian regression framework with prior beliefs for alpha generated based on equity analysts’ recommendations, I find no significant difference in out-of-sample performance between portfolios which take analyst recommendations into account and portfolios which do not.
