Sell-Side Analysts’ Benchmarks

Forthcoming, The Accounting Review

AFA 2013 San Diego Meetings Paper

45 Pages Posted: 18 Nov 2011 Last revised: 14 Apr 2019

See all articles by Ohad Kadan

Ohad Kadan

Washington University in St. Louis - John M. Olin Business School

Leonardo Madureira

Case Western Reserve University - Weatherhead School of Management

Rong Wang

Singapore Management University; Singapore Management University - Lee Kong Chian School of Business

Tzachi Zach

Ohio State University (OSU) - Fisher College of Business

Date Written: March 5, 2019

Abstract

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

Kadan, Ohad and Madureira, Leonardo and Wang, Rong and Zach, Tzachi, Sell-Side Analysts’ Benchmarks (March 5, 2019). Forthcoming, The Accounting Review; AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1961199 or http://dx.doi.org/10.2139/ssrn.1961199

Ohad Kadan

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Leonardo Madureira

Case Western Reserve University - Weatherhead School of Management ( email )

364 PBL Building
Cleveland, OH 44106
United States
216-368-5003 (Phone)

HOME PAGE: http://faculty.weatherhead.case.edu/madureira/

Rong Wang

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Tzachi Zach (Contact Author)

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-4101 (Phone)

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