The Value of Client Access to Analyst Recommendations
42 Pages Posted: 6 Oct 2003
Date Written: February 2004
Abstract
Early access to stock recommendations provides brokerage firm clients with incremental investment value. After controlling for transaction costs, purchasing (selling) following upgrades (downgrades) results in average two-day returns of 1.02% (1.50%). Short-term profit opportunities persist for two hours following the pre-market release of new recommendations. A calendar-based strategy produces annualized returns of over 30% and the results are robust within sub-periods. Recommending firms' market makers shift their quotes accordingly, providing indirect evidence that clients make use of their short-term informational advantage.
JEL Classification: G14, G24
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Can Investors Profit from the Prophets? Consensus Analyst Recommendations and Stock Returns
By Brad M. Barber, Reuven Lehavy, ...
-
Security Analysts' Career Concerns and Herding of Earnings Forecasts
By Jeffrey D. Kubik, Amit Solomon, ...
-
By Patricia Dechow, Amy P. Hutton, ...
-
Analyzing the Analysts: When Do Recommendations Add Value?
By Narasimhan Jegadeesh, Joonghyuk Kim, ...
-
An Empirical Analysis of Analysts' Target Prices: Short Term Informativeness and Long Term Dynamics
By Alon Brav and Reuven Lehavy
-
How Do Analysts Use Their Earnings Forecasts in Generating Stock Recommendations?