Can Investors in the Stock Market Generate Profit from the Analysts? - An Empirical Analysis of Analysts' Signals Disseminated from the Bloomberg Terminal

20 Pages Posted: 21 Jun 2013

See all articles by Katsuhiko Okada

Katsuhiko Okada

Kwansei Gakuin University Business School

Takahiro Azuma

Independent

Date Written: June 7, 2013

Abstract

Using a large database of Japanese analysts’ rating information over the period 2000-2010, we examine short term market reactions to the announcement. We find a significant market reaction to the information contained in the analysts’ rating. Particularly, the market reacts sensitively to the rating changes rather than the rating itself. We also examine whether investors are able to achieve a positive net return by taking advantage of the abnormal market reaction to the analysts’ signal by constructing a dynamic calendar time equity long-short portfolio. Results indicate that investors are able to capture some abnormal profit trading on such signals, however, large size investment based on the same strategy becomes implausible due to the transaction costs.

Keywords: Anomaly, Event study, Sell-side Analysts, Calendar time long short portfolio, transactions cost

JEL Classification: G14

Suggested Citation

Okada, Katsuhiko and Azuma, Takahiro, Can Investors in the Stock Market Generate Profit from the Analysts? - An Empirical Analysis of Analysts' Signals Disseminated from the Bloomberg Terminal (June 7, 2013). Available at SSRN: https://ssrn.com/abstract=2275901 or http://dx.doi.org/10.2139/ssrn.2275901

Katsuhiko Okada (Contact Author)

Kwansei Gakuin University Business School ( email )

1-1-155, Uegahara, Nishinomiya
Hyogo, 669-1337
Japan
1798546377 (Phone)

HOME PAGE: http://www.kwansei-ac.jp/iba/index.html

Takahiro Azuma

Independent ( email )

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