Analyst Recommendations and Mispricing Across the Globe

85 Pages Posted: 13 Oct 2020 Last revised: 26 Mar 2024

See all articles by Vitor Azevedo

Vitor Azevedo

Department of Financial Management - RPTU Kaiserslautern-Landau

Sebastian Müller

Technische Universität München (TUM) - TUM School of Management

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, analyst recommendations, anomalies, international stock markets, market efficiency.

JEL Classification: G12, G29, M41

Suggested Citation

Azevedo, Vitor and Müller, Sebastian, Analyst Recommendations and Mispricing 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)

Department of Financial Management - RPTU Kaiserslautern-Landau ( email )

Kaiserslautern
Germany

Sebastian Müller

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

Germany

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