Sell Side Recommendations during Booms and Busts
University of Cologne - Department of Corporate Finance; University of Cologne - Centre for Financial Research (CFR)
Christian W. Kretzmann
HHL Leipzig Graduate School of Management
Christoph M. Maaz
University of Leeds
University of Cologne
January 21, 2013
Our study documents that the information content and the information processing of stock recommendations differ fundamentally between expansions and recessions. The initial market reaction to all recommendations is more intense in recessions, but “Buy” recommendations do not have long-term investment value. We find that in recessions sell side analysts are too optimistic about stocks they recommend to buy, while investors initially overreact to these recommended stocks. In expansions, no such contradicting pattern exists. We also document that analysts favor “glamour” over “value” stocks irrespective of the state of the economy.
Number of Pages in PDF File: 37
Keywords: security analysts, stock recommendations, business cycle
JEL Classification: E32, G01, G11, G14, G24working papers series
Date posted: January 21, 2013
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