Investor Sentiment, Stock Returns, and Analyst Recommendation Changes
14 Pages Posted: 4 Feb 2019
Date Written: January 22, 2019
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: Suggested Citation