Analyst Recommendations and Anomalies Across the Globe
54 Pages Posted: 13 Oct 2020 Last revised: 18 Dec 2020
Date Written: October 5, 2020
We reexamine the value of analyst recommendations using a dataset of 45 countries, 3.8 million firm-month observations, and 222 return anomalies from 1994 to 2019. Recommendations lead to highly significant (insignificant) abnormal returns in international markets (in the U.S.). 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, less individualistic markets, and in low sentiment periods. Our results support limits-to-arbitrage and behavioral explanations of global market inefficiencies.
Keywords: Analysts, analyst recommendations, anomalies, international stock markets, market efficiency.
JEL Classification: G12, G29, M41
Suggested Citation: Suggested Citation