Do Analysts’ Recommendations Have Investment Values:Empirical Evidence From Listed Companies
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| Title | Do Analysts’ Recommendations Have Investment Values:Empirical Evidence From Listed Companies
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| Author | Luo Danglun and Wang Hong |
| Organization | Lingnan College, Sun Yat-sen University |
| Email | luodl@mail.sysu.edu.cn |
| Key Words | Analysts; Recommendations; Star Analysts; Star Brokers; Asymmetric Information |
| Abstract | The scandal of analysts’ reports have attracted great attention of the public. Do analysts’ recommendations have investment values? In other words, can investors gain superior profits by following analysts’ recommendations? This paper collected more than 50 thousand recommendations on 1563 listed companies in Chinese A Share Market, whose time range is from Jan. 1st,2009 to Dec.31st,2010, and utilized event study and multiple regression to reach empirical evidence. (1) The paper finds evidence supporting analysts’ predictive ability. The positive market reactions following analysts’ higher rating level, star analysts’ and star brokers’ recommendations can been seen clearly. A positive recommendation from a star analyst or broker can be more useful. (2) When information becomes more symmetrical in the market, the CAR (Cummulative Abnormal Return) reduces simultaneously, which is to say, good information circumstances can crowd out the CAR. Analysts are of influence and importance in eliminating information asymmetry. This study help to deepen the understanding of the roles of analysts and to improve the regulatory efficiency of the growing industry of analysts. |
| Serial Number | WP168 |
| Time | 2012-02-14 |
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