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The Determinants of the Stock Price Performance of Analyst Recommendations

Author

Listed:
  • Yaling Lin
  • Liang-Chien Lee
  • Tsung-Li Chi
  • Chen-Chang Lo
  • Wai-Shen Chung

Abstract

This study examines the cross-sectional determinants of the price reaction to analysts’ recommendations disseminated through various type of media and for firms listed in Taiwan stock markets. We measure abnormal returns using the market model of event study. Based on the type of media (traditional media/social media) and the type of exchange (Taiwan Stock Exchange (TWSE)/Taipei Exchange (TPEx)), we classify the combined sample observations into four samples and run quantile regressions to investigate whether the relation will be uniform across various quantile levels. Our results show that the relation between firm characteristics and cumulative abnormal returns is not homogeneous across various quantiles of abnormal returns. Our evidence indicates that in general the relation tends to be stronger for firms at higher performance quantile levels and tends to be more pronounced for TWSE firms. The strongest relation is found for the Traditional/TWSE sample, where the abnormal returns are positively related to insider ownership and prior-period earnings, and negatively related to institutional shareholding and price-to-book ratio for firms in the highest abnormal performance quantile.

Suggested Citation

  • Yaling Lin & Liang-Chien Lee & Tsung-Li Chi & Chen-Chang Lo & Wai-Shen Chung, 2019. "The Determinants of the Stock Price Performance of Analyst Recommendations," Asian Social Science, Canadian Center of Science and Education, vol. 15(11), pages 1-25, November.
    • Handle: RePEc:ibn:assjnl:v:15:y:2019:i:11:p:25
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    References listed on IDEAS

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    1. Amihud, Yakov, 2002. "Illiquidity and stock returns: cross-section and time-series effects," Journal of Financial Markets, Elsevier, vol. 5(1), pages 31-56, January.
    2. Brad Barber & Reuven Lehavy & Maureen McNichols & Brett Trueman, 2001. "Can Investors Profit from the Prophets? Security Analyst Recommendations and Stock Returns," Journal of Finance, American Finance Association, vol. 56(2), pages 531-563, April.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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