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The trend is an analyst's friend: Analyst recommendations and market technicals

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  • Ryan Flugum

Abstract

In this paper, I assess the empirical relation between analyst recommendation decisions and market technicals. Research shows market technicals have predictive content that leads to abnormal returns. Recent survey evidence, however, shows analysts' rank technical signals as having relatively little usefulness in forming their recommendations, leading them to underweight the information content of technical signals. I find lagged positive stock price trends are associated with a greater likelihood of consensus recommendation upgrade. Furthermore, I show market technicals enhance the investment value of consensus recommendations. Overall, I demonstrate that market technicals are an important complement to analyst recommendations.

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  • Ryan Flugum, 2021. "The trend is an analyst's friend: Analyst recommendations and market technicals," The Financial Review, Eastern Finance Association, vol. 56(2), pages 301-330, May.
    • Handle: RePEc:bla:finrev:v:56:y:2021:i:2:p:301-330
    DOI: 10.1111/fire.12251
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    Cited by:

    1. Chen Su, 2023. "The price impact of analyst revisions and the state of the economy: Evidence around the world," The Financial Review, Eastern Finance Association, vol. 58(4), pages 887-930, November.
    2. Li Liu & Zhiyuan Pan & Yudong Wang, 2022. "Shrinking return forecasts," The Financial Review, Eastern Finance Association, vol. 57(3), pages 641-661, August.
    3. Hung, Chiayu & Lai, Hung-Neng, 2022. "Information asymmetry and the profitability of technical analysis," Journal of Banking & Finance, Elsevier, vol. 134(C).
    4. Xu Cheng & Dongmin Kong & Xinwei Zheng & Qi Tang, 2022. "Do foreign investors crowd out sell‐side analysts? Evidence from China," The Financial Review, Eastern Finance Association, vol. 57(4), pages 815-834, November.
    5. Jaeyong Lee & Jonathan A. Batten & Hyuna Ham & Doojin Ryu, 2024. "Does Portfolio Momentum Beat Analyst Advice?," Abacus, Accounting Foundation, University of Sydney, vol. 60(2), pages 338-364, June.

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