Bucking the Trend: The Informativeness of Analyst Contrarian Recommendations
Posted: 8 Apr 2014
Date Written: April 7, 2014
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
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