Sell-Side Analysts’ Benchmarks
The Accounting Review, vol. 95, no. 1, pp. 211-232, 2020
45 Pages Posted: 18 Nov 2011 Last revised: 6 Jul 2021
Date Written: March 5, 2019
Sell-side analysts employ different benchmarks when defining their recommendations. A buy for some brokers means the stock is expected to outperform its industry, while for other brokers it means the stock is expected to outperform the market, or some return threshold. We show that these stated benchmarks have implications for the distribution of recommendations, price reactions to recommendations, and the investment value of recommendations. We conclude that, depending on the question, academics may need to account for the benchmarks when studying analysts’ outputs, and investors may find the benchmarks beneficial in interpreting analysts’ advice.
Keywords: Analysts; Benchmarks; Recommendations
JEL Classification: G10, G24
Suggested Citation: Suggested Citation