10 Pages Posted: 28 Mar 2010
Date Written: March 21, 2010
Using a sample that post-dates important regulatory changes in Europe, we show that a buy recommendation from an analyst on a “consensus sell” stock is, on average, sufficient to cause the stock to start to rise in value. Similarly, a sell recommendation on a “consensus buy” stock can often stop it from rising, although the effect is weaker. We also demonstrate that recommendations from large, global brokerage firms have more of an impact on stock prices than smaller brokerage firms when they disagree with the consensus. This is especially noticeable when they issue buy recommendations on “consensus sells”. However, in general the large brokers are less likely than smaller brokers to make a “brave call” (a buy on an under-performing “consensus sell” stock, or a sell on an outperforming “consensus buy” stock).
Keywords: Analyst Forecasts, Analyst Recommendations, Sell Recommendations, Buy Recommendations, Analyst Disagreement, Consensus Sell, Consensus Buy, Brave Call, Large Brokers, Small Brokers
JEL Classification: G10, G14, G11, G24, M40, M41
Suggested Citation: Suggested Citation
Harvey, Campbell R. and Rattray, Sandy and Utans, Joachim and Mawji, Yasser, When European Analysts Disagree, Who Should You Pay Attention To? (March 21, 2010). Available at SSRN: https://ssrn.com/abstract=1576187 or http://dx.doi.org/10.2139/ssrn.1576187