The Cross Section of Analyst Recommendations Academic Article

abstract

• AbstractWe analyze the price reaction to analysts' revisions by testing the Griffin and Tversky (1992) hypothesis that agents place emphasis on the strength of the signal (the dramatic nature of the event) and may de-emphasize the weight (the ability of the analyst making the recommendation). Two attributes, namely, years of experience and the reputation of the analysts' brokerage houses form proxies for analyst ability (or weight) that we validate by documenting that revisions by high ability analysts outperform those by low ability ones. We find evidence of return persistence following small (low strength) revisions by high ability analysts and the opposite return pattern following large (high strength) revisions of low ability analysts, consistent with the arguments of Griffin and Tversky (1992). Our study provides an empirical link between evidence on individual decision making and stock market returns, and also helps promote an understanding of the analyst industry as well as its interaction with the investing population.

authors

• Sorescu, Sorin

author list (cited authors)

• Sorescu, S., & Subrahmanyam, A

citation count

• 75

complete list of authors

• Sorescu, Sorin||Subrahmanyam, Avanidhar

publication date

• January 2006

publisher

• Cambridge University Press (CUP)  Publisher

published in

• Journal of Financial and Quantitative Analysis  Journal

keywords

• Analysts
• Return Reactions
• Stock Recommendations

Digital Object Identifier (DOI)

• 10.1017/s0022109000002453

start page

• 139

end page

• 168

volume

• 41

issue

• 1

URL

• http%3A%2F%2Fdx.doi.org%2F10.1017%2Fs0022109000002453