Can Analysts Pick Stocks for the Long-Run?

64 Pages Posted: 16 Mar 2011 Last revised: 11 Feb 2015

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

Liyu Ye

Tulane University - A.B. Freeman School of Business

Date Written: February 9, 2015

Abstract

This paper examines post-revision return drift, or PRD, following analysts’ revisions of their stock recommendations. PRD refers to the finding that the analysts’ recommendation changes predict future long-term returns in the same direction as the change (i.e., upgrades are followed by positive returns, and downgrades are followed by negative returns). During the high-frequency algorithmic trading period of 2003-2010, average PRD is no longer significantly different from zero. The new findings agree with improved market efficiency after declines in real trading cost inefficiencies. They are consistent with a reduced information production role for analysts in the supercomputer era.

Keywords: Analysts’ forecasts, Financial analysts, Financial markets, Investment banking, Market efficiency, Security analysts, Behavioral finance

JEL Classification: G02, G14, G24

Suggested Citation

Altinkilic, Oya and Hansen, Robert S. and Ye, Liyu, Can Analysts Pick Stocks for the Long-Run? (February 9, 2015). Available at SSRN: https://ssrn.com/abstract=1787707 or http://dx.doi.org/10.2139/ssrn.1787707

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)

Liyu Ye

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

7 McAlister Drive
New Orleans, LA 70118
United States
504-862-8094 (Phone)

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