Analyst Recommendations and Mispricing Across the Globe
Journal of Banking & Finance, Forthcoming
88 Pages Posted: 13 Oct 2020 Last revised: 21 Aug 2024
Date Written: October 5, 2020
Abstract
We examine the value of analysts' recommendations using a dataset of 45 countries, 3.8 million firm-month observations, and 222 return anomalies from 1994 to 2019. Unlike U.S.-based evidence, recommendations lead to subsequent highly significant abnormal returns in international markets. Furthermore, analysts do not seem to strengthen mispricing in international markets, as they give more favorable recommendations to (anomaly-ranked) underpriced stocks, and inconsistencies between recommendations and composite anomaly ranks lead to lower, not higher, abnormal returns. Recommendations are more valuable in less developed and less individualistic markets. Our results suggest that analysts' recommendations provide more value to investors than previously thought.
Keywords: Analysts, analysts' recommendations, anomalies, international stock markets, market efficiency JEL classifications: G12, G29, M41
JEL Classification: G12, G29, M41
Suggested Citation: Suggested Citation