Abstract

http://ssrn.com/abstract=2190437
 
 

References (46)



 
 

Footnotes (11)



 


 



Stock Duration, Analysts Recommendations, and Misvaluation


Martijn Cremers


University of Notre Dame

Ankur Pareek


Rutgers University

Zacharias Sautner


Frankfurt School of Finance & Management gemeinnützige GmbH

December 24, 2014


Abstract:     
This paper empirically studies how the interaction between short-term investors and analyst recommendations is related to a speculative component in stock prices. Using a new measure of the holding duration of institutional investors (called Stock Duration), we document that frequently traded stocks with optimistic (pessimistic) analyst recommendations have large negative (positive) future alphas that follow large positive (negative) past outperformance. Using Russell 2000 index reconstitutions to capture exogenous changes in institutional ownership, Stock Duration and analyst coverage, we conclude that strong analyst recommendations serve as a coordination mechanism among short-term, likely speculative, traders, causing significant misvaluations and subsequent price reversals.

Number of Pages in PDF File: 46

Keywords: Investor Horizon, Short-Termism, Analysts, Mispricing


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Date posted: December 19, 2012 ; Last revised: December 25, 2014

Suggested Citation

Cremers, Martijn and Pareek, Ankur and Sautner, Zacharias, Stock Duration, Analysts Recommendations, and Misvaluation (December 24, 2014). Available at SSRN: http://ssrn.com/abstract=2190437 or http://dx.doi.org/10.2139/ssrn.2190437

Contact Information

K. J. Martijn Cremers
University of Notre Dame ( email )
P.O. Box 399
Notre Dame, IN 46556-0399
United States
Ankur Pareek
Rutgers University ( email )
1 Washington Park
Newark, NJ 07102
United States
973-353-1646 (Phone)
Zacharias Sautner (Contact Author)
Frankfurt School of Finance & Management gemeinnützige GmbH ( email )
Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany
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