When European Analysts Disagree, Who Should You Pay Attention To?

10 Pages Posted: 28 Mar 2010  

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Sandy Rattray

Man AHL

Joachim Utans

GLG Partners Inc.

Yasser Mawji

GLG Partners Inc.

Date Written: March 21, 2010

Abstract

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

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

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)
919-660-8030 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

Sandy Rattray

Man AHL ( email )

Riverbank House
2 Swan Lane
London, EC4R 3AD
United Kingdom

Joachim Utans

GLG Partners Inc. ( email )

London
United Kingdom

Yasser Mawji

GLG Partners Inc. ( email )

London
United Kingdom

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