Investor Response to Online Value Line Rank Changes: Foreign versus Local Stocks
37 Pages Posted: 29 Nov 2015 Last revised: 16 Oct 2019
Date Written: February 9, 2016
We find that the Value Line effect is confined to U.S. stocks. U.S. listed stocks significantly outperform their benchmarks long after Value Line Timeliness rank change announcements. In contrast, we find no evidence of a Value Line effect for recommendations made for foreign stocks that list on U.S. exchanges, nor for those that list outside the U.S. For days surrounding rank change announcements, trading volume is abnormally high for U.S. listed stocks, but remains unchanged for the foreign stock sample. Our findings are unchanged after controlling for unique valuation challenges, varying market conditions, beta, firm size, book-to-market, momentum, and post earnings announcement effects.
Keywords: Value Line ranking system, Analyst recommendations, Market efficiency
JEL Classification: G11, G14
Suggested Citation: Suggested Citation