The Predictive Power of Analysts and Their Impact on Prices

14 Pages Posted: 21 Jan 2022

See all articles by Thibault Jaisson

Thibault Jaisson

Pictet Asset Management

Laurent Nguyen

Pictet Asset Management

Reda Jürg Messikh

Pictet Asset Management SA

Gabriele Susinno

Pictet Asset Management

Date Written: July 12, 2021

Abstract

In this note, we study of the impact of sell side analyst recommendations and their revisions on prices. We show that the speed at which their information is incorporated into prices has increased in the last decades. This makes systematic strategies taking advantage of recommendation barely profitable after costs in recent years. Our main contribution is the introduction of a Bayesian model of the distribution of the Strength of analysts. Using this model, we manage to find both analysts who have impact on prices and analysts which are underestimated by the market in the sense that the short term price reaction to the recommendation is followed by a longer term drift.

Keywords: Sell side analysts, Recommendations, Price impact, Graphical modeling, Analysts Strength

JEL Classification: C01, C11, C80

Suggested Citation

Jaisson, Thibault and Nguyen, Laurent and Messikh, Reda Jürg and Susinno, Gabriele, The Predictive Power of Analysts and Their Impact on Prices (July 12, 2021). Available at SSRN: https://ssrn.com/abstract=3973080 or http://dx.doi.org/10.2139/ssrn.3973080

Thibault Jaisson (Contact Author)

Pictet Asset Management ( email )

Geneva
Switzerland

Laurent Nguyen

Pictet Asset Management ( email )

Pictet Asset Management SA
Route des Acacias 60
Geneva, Geneva 1211
Switzerland

Reda Jürg Messikh

Pictet Asset Management SA ( email )

Geneva
Switzerland

Gabriele Susinno

Pictet Asset Management ( email )

Route des Acacias 60
Geneva, 1211
Switzerland

HOME PAGE: http://www.am.pictet/

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