The First- and Second-Hand Effect of Analysts' Stock Recommendations: Evidence from the Swiss Stock Market

27 Pages Posted: 16 Oct 2008

See all articles by Philipp M. Schlumpf

Philipp M. Schlumpf

University of Basel - Department of Finance

Markus Schmid

University of St. Gallen - Swiss Institute of Banking and Finance; University of St. Gallen - School of Finance

Heinz Zimmermann

University of Basel - Center for Economic Science (WWZ) - Department of Finance

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Abstract

This paper empirically investigates the impact of both the first release of analysts' stock recommendations to a limited clientele and the subsequent dissemination of the same information in a major newspaper to a broader audience. For a sample of 1460 stock recommendations published in FuW, Switzerland's major financial newspaper, significant positive abnormal returns on the day of the original release of buy recommendations and on the day of publication in FuW are documented. Tests of the price pressure and information hypotheses reveal that analysts' recommendations contain new information, which is quickly incorporated in the stock prices on the first release of this information. In contrast, the statistically significant announcement effects associated with the subsequent publication can be primarily ascribed to price pressure in the underlying securities.

Suggested Citation

Schlumpf, Philipp M. and Schmid, Markus and Zimmermann, Heinz, The First- and Second-Hand Effect of Analysts' Stock Recommendations: Evidence from the Swiss Stock Market. European Financial Management, Vol. 14, Issue 5, pp. 962-988, November 2008. Available at SSRN: https://ssrn.com/abstract=1284002 or http://dx.doi.org/10.1111/j.1468-036X.2007.00435.x

Philipp M. Schlumpf (Contact Author)

University of Basel - Department of Finance ( email )

Petersplatz 1
Basel, CH-4003
Switzerland

Markus Schmid

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstrasse 52
St. Gallen, 9000
Switzerland

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Heinz Zimmermann

University of Basel - Center for Economic Science (WWZ) - Department of Finance ( email )

Peter Merian Weg 6
Basel, 4002
Switzerland
+41 61 267 33 16 (Phone)
+41 61 267 08 98 (Fax)

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