On the Information Role of Stock Recommendation Revisions

Posted: 4 Jun 2009 Last revised: 5 Sep 2013

See all articles by Oya Altinkilic

Oya Altinkilic

University of Maryland - Robert H. Smith School of Business

Robert S. Hansen

Tulane University - A.B. Freeman School of Business

Abstract

We examine the information transmission role of stock recommendation revisions by sell-side security analysts. Revisions are associated with economically insignificant mean price reactions and often piggyback on recent news, events, long-term momentum, and short-run contrarian return predictors, typically downgrading after bad news and upgrading after good news. However, the revisions are usually information-free for investors. The findings go against the long-standing view that recommendations are an important means by which analysts assimilate information into stock prices. They disagree with the view of policymakers that analysts’ stock picks materially impact stock prices.

Keywords: analysts’ recommendations, brokerage research, capital markets, investment banking, market efficiency, security analysts

JEL Classification: D82, G11, G12, G14, G24, G28, K22, M41

Suggested Citation

Altinkilic, Oya and Hansen, Robert S., On the Information Role of Stock Recommendation Revisions. Journal of Accounting & Economics (JAE), 2009, 648 17-35, Available at SSRN: https://ssrn.com/abstract=1413822

Oya Altinkilic

University of Maryland - Robert H. Smith School of Business ( email )

4426 Van Munching Hall
Department of Finance
College Park, MD 20742
United States

Robert S. Hansen (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

Goldring/Woldenberg Hall
7 McAllister Blvd.
New Orleans, LA 70118
United States
504-865-5624 (Phone)

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