Bucking the Trend: The Informativeness of Analyst Contrarian Recommendations

Posted: 8 Apr 2014

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

Xi Liu

Miami University of Ohio - Richard T. Farmer School of Business Administration

Christos Pantzalis

University of South Florida

Date Written: April 7, 2014

Abstract

This paper examines price reactions to analysts’ recommendations issued in the opposite direction of recent stock price movements. We find that upgrade and downgrade contrarian recommendations induce larger market reactions than non-contrarian recommendations, consistent with the view that they are more informative. These results are strongest in the period before Regulation FD, consistent with the view that private information was likely curbed after its implementation. Contrarian downgrades are more likely to be issued by all-star analysts, but less likely by experienced and busy analysts suggesting that contrarian recommendations are subject to career concerns.

Keywords: Analyst recommendation, Regulation FD

Suggested Citation

Bradley, Daniel and Liu, Xi and Pantzalis, Christos, Bucking the Trend: The Informativeness of Analyst Contrarian Recommendations (April 7, 2014). Available at SSRN: https://ssrn.com/abstract=2421308

Daniel Bradley

University of South Florida ( email )

Tampa, FL 33620
United States

Xi Liu (Contact Author)

Miami University of Ohio - Richard T. Farmer School of Business Administration ( email )

Oxford, OH 45056
United States

Christos Pantzalis

University of South Florida ( email )

Tampa, FL 33620-5500
United States
(813) 974-3262 (Phone)

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