Investor Sentiment, Stock Returns, and Analyst Recommendation Changes

14 Pages Posted: 4 Feb 2019

See all articles by Karam Kim

Karam Kim

Sungkyunkwan University - College of Economics

Doojin Ryu

Sungkyunkwan University

Heejin Yang

Sungkyunkwan University; Soongsil University

Date Written: January 22, 2019

Abstract

This study examines the responses of investor sentiment and stock market returns to announcements of changes in analyst recommendation as well as the effect of these announcements on the relationship between sentiment and stock returns. Investor sentiment is more sensitive to upgrade announcements than to downgrade announcements, implying that news about upgrades reduces information asymmetry among investors. Furthermore, investor sentiment significantly affects the response of stock returns to downgrade announcements because investor sentiment is pessimistic before bad news is released, whereas we do not find a similar result for upgrade announcements.

Keywords: Analyst Recommendation Changes, Event Study, Investor Sentiment, Stock Returns

JEL Classification: G14, G15, G24

Suggested Citation

kim, karam and Ryu, Doojin and Yang, Heejin and Yang, Heejin, Investor Sentiment, Stock Returns, and Analyst Recommendation Changes (January 22, 2019). Available at SSRN: https://ssrn.com/abstract=3320318 or http://dx.doi.org/10.2139/ssrn.3320318

Karam Kim (Contact Author)

Sungkyunkwan University - College of Economics ( email )

Korea, Republic of (South Korea)

Doojin Ryu

Sungkyunkwan University ( email )

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)

Heejin Yang

Sungkyunkwan University ( email )

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)

Soongsil University ( email )

511, Sangdo-dong, Dongjak-gu
Seoul
Korea, Republic of (South Korea)

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