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Analyst recommendations and mispricing across the globe

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  • Azevedo, Vitor
  • Müller, Sebastian

Abstract

We examine the value of analysts’ recommendations using a dataset of 45 countries, 3.8 million firm-month observations, and 222 return anomalies from 1994 to 2019. Unlike U.S.-based evidence, recommendations lead to subsequent highly significant abnormal returns in international markets. Furthermore, analysts do not seem to strengthen mispricing in international markets, as they give more favorable recommendations to (anomaly-ranked) underpriced stocks, and inconsistencies between recommendations and composite anomaly ranks lead to lower, not higher, abnormal returns. Recommendations are more valuable in less developed and less individualistic markets. Our results suggest that analysts’ recommendations provide more value to investors than previously thought.

Suggested Citation

  • Azevedo, Vitor & Müller, Sebastian, 2024. "Analyst recommendations and mispricing across the globe," Journal of Banking & Finance, Elsevier, vol. 169(C).
  • Handle: RePEc:eee:jbfina:v:169:y:2024:i:c:s0378426624002103
    DOI: 10.1016/j.jbankfin.2024.107296
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    Keywords

    Analysts; Analysts’ recommendations; Anomalies; International stock markets; Market efficiency;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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