Value of Analyst Recommendations: International Evidence
U of Illinois at Urbana-Champaign Working Paper
41 Pages Posted: 14 Jul 2003
Date Written: June 2003
This paper examines analyst recommendations in the G7 countries and evaluates the value of these recommendations over the 1993 to 2002 period. We find that the proportion of sell and strong sell recommendations in all of the countries are less than the proportion of the buy and strong buy recommendations. The frequency of sell recommendations is the lowest in the U.S. We also find that stock prices react significantly to recommendation revisions on the day of recommendation and on the following day in all of these countries except Italy. We find the largest price reactions in the U.S., followed by Japan. We evaluate trading strategies that buy upgraded stocks and sell downgraded stocks. Here again, the trading strategies have the highest profits in the U.S., followed by Japan.
Keywords: Analyst recommendations, market efficiency, stock recommendations
JEL Classification: G14, D82, G24, G28
Suggested Citation: Suggested Citation