Do Stars Shine? Comparing the Performance Persistence of Star Sell-Side Analysts Listed by Institutional Investor, the Wall Street Journal, and StarMine

30 Pages Posted: 2 Sep 2015 Last revised: 2 Sep 2016

See all articles by Yury Kucheev

Yury Kucheev

KTH Royal Institute of Technology

Felipe Ruiz Lopez

Universidad Politécnica de Madrid

Tomas Sorensson

KTH Royal Institute of Technology - Industrial Engineering and Management; Swedish House of Finance; KTH Royal Institute of Technology - Industrial Engineering and Management

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Date Written: August 28, 2015

Abstract

In this study, we investigate the profitability persistence of the investment recommendations from analysts listed in four different star rankings: Institutional Investor magazine, StarMine’s “Top Earnings Estimators” and “Top Stock Pickers” and The Wall Street Journal. We compare the performance in the previous year with the post-election period and show the predictive power of each evaluation methodology used by mentioned star ratings. We document that the highest average monthly abnormal return of holding a long-short portfolio, 1.58 percent, is obtained by following the recommendations of the group of star sell-side analysts rated by The Wall Street Journal during the period from 2003-2013. The highest drop in the performance from the pre-election to the post-selection period was observed for the group of analysts listed by the “Top Stock Pickers” of StarMine. The results indicate that the choice of analyst ranking is economically important in making investment decisions.

Keywords: Star analysts, Analyst recommendations, StarMine, Institutional Investor, The Wall Street Journal

JEL Classification: G23, G24

Suggested Citation

Kucheev, Yury and Ruiz Lopez, Felipe and Sorensson, Tomas, Do Stars Shine? Comparing the Performance Persistence of Star Sell-Side Analysts Listed by Institutional Investor, the Wall Street Journal, and StarMine (August 28, 2015). Swedish House of Finance Research Paper No. 15-12. Available at SSRN: https://ssrn.com/abstract=2652737 or http://dx.doi.org/10.2139/ssrn.2652737

Yury Kucheev (Contact Author)

KTH Royal Institute of Technology ( email )

Lindstedtsvägen 30
Stockholm, SE-100 44
Sweden

Felipe Ruiz Lopez

Universidad Politécnica de Madrid ( email )

Ciudad Universitaria
Madrid, MA Madrid 28040
United States

Tomas Sorensson

KTH Royal Institute of Technology - Industrial Engineering and Management ( email )

Lindstedtsvägen 30-100 44
Stockholm
Sweden
+46-(0)8-790 87 39 (Phone)
+46-(0)8-790 67 41 (Fax)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

KTH Royal Institute of Technology - Industrial Engineering and Management ( email )

Lindstedtsvägen 30-100 44
Stockholm
Sweden
+46-(0)8-790 87 39 (Phone)
+46-(0)8-790 67 41 (Fax)

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