Analyst Recommendations and Anomalies Across the Globe

74 Pages Posted: 13 Oct 2020 Last revised: 29 Oct 2020

See all articles by Vitor Azevedo

Vitor Azevedo

Technische Universität München (TUM), Department of Financial Management and Capital Markets

Sebastian Müller

Technische Universität München (TUM) - TUM School of Management

Date Written: October 5, 2020

Abstract

We reexamine the value of analyst recommendations using a dataset of 45 countries, 3.8 million firm-month observations, and more than 200 return anomalies from 1994 to 2019. We find that analyst recommendations lead to highly significant (insignificant) abnormal returns in international markets (in the U.S.). In contrast to recent U.S.-based evidence, analysts do not seem to contribute to mispricing in international markets, as they tend to 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 in less individualistic markets and during low sentiment periods. Our results support limits-to-arbitrage and behavioral explanations of global stock market inefficiencies.

Keywords: Analysts, analyst recommendations, anomalies, international stock markets, market efficiency.

JEL Classification: G12, G29, M41

Suggested Citation

Azevedo, Vitor and Müller, Sebastian, Analyst Recommendations and Anomalies Across the Globe (October 5, 2020). Available at SSRN: https://ssrn.com/abstract=3705141 or http://dx.doi.org/10.2139/ssrn.3705141

Vitor Azevedo (Contact Author)

Technische Universität München (TUM), Department of Financial Management and Capital Markets ( email )

Munich, 80333
Germany

Sebastian Müller

Technische Universität München (TUM) - TUM School of Management ( email )

Germany

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