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Financial analysts' stock recommendation revisions and stock price changes

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  • Yung-Ho Chang
  • Chia-Chung Chan

Abstract

The market reaction to financial analysts' stock recommendation revisions is examined in terms of magnitude and direction. It is found that market-adjusted stock returns are associated with the direction of stock recommendation revisions. For the stocks that receive downward stock recommendation revisions, the market-adjusted stock returns can also be explained by the magnitude of stock recommendation revisions, brokerage houses' publicity, firm size, firm age, New York Stock Exchange listing, and stock price momentum. The empirical evidence suggests that financial analysts' downward stock recommendation revisions provide superior information to investors than do upward stock recommendation revisions.

Suggested Citation

  • Yung-Ho Chang & Chia-Chung Chan, 2008. "Financial analysts' stock recommendation revisions and stock price changes," Applied Financial Economics, Taylor & Francis Journals, vol. 18(4), pages 309-325.
    • Handle: RePEc:taf:apfiec:v:18:y:2008:i:4:p:309-325
    DOI: 10.1080/09603100600606131
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    Citations

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    Cited by:

    1. AltInkIlIç, Oya & Hansen, Robert S., 2009. "On the information role of stock recommendation revisions," Journal of Accounting and Economics, Elsevier, vol. 48(1), pages 17-36, October.
    2. Premti, Arjan & Garcia-Feijoo, Luis & Madura, Jeff, 2017. "Information content of analyst recommendations in the banking industry," International Review of Financial Analysis, Elsevier, vol. 49(C), pages 35-47.
    3. Dror Parnes, 2010. "The information content of analysts reports and bankruptcy risk measures," Applied Financial Economics, Taylor & Francis Journals, vol. 20(19), pages 1499-1513.
    4. Barakat, Ahmed & Ashby, Simon & Fenn, Paul, 2018. "The reputational effects of analysts' stock recommendations and credit ratings: Evidence from operational risk announcements in the financial industry," International Review of Financial Analysis, Elsevier, vol. 55(C), pages 1-22.
    5. Hao, Rubin & Liao, Guanmin & Ding, Wenhong & Guan, Wei, 2022. "The informativeness of regional GDP announcements: Evidence from China," Journal of Empirical Finance, Elsevier, vol. 67(C), pages 78-99.

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