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Analyst's stock views and revision actions

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  • Li, Tao

Abstract

It is desirable to know analysts’ true stock views when they issue conflicting revisions in their earnings forecasts, price targets, and stock recommendations. This study employs the hidden Markov model (HMM) to model analysts’ revision activities and make inference for the “stock views”. The validity of the “stock views” is examined through the revision-view consistency. The results demonstrate that revisions consistent with stock views trigger stronger abnormal returns than revisions inconsistent with views. Analysts’ revisions are less effective when the stock views are perceived to be stagnant. Investors and researchers can use stock views to identify more informative revisions.

Suggested Citation

  • Li, Tao, 2022. "Analyst's stock views and revision actions," Finance Research Letters, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001148
    DOI: 10.1016/j.frl.2021.102033
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    References listed on IDEAS

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    More about this item

    Keywords

    Earnings forecasts revisions; Stock recommendations revisions; Price target revisions; Stock views; Hidden Markov model; Market reactions;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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