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Slow price reactions to analysts' recommendation revisions

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  • Kotaro Miwa
  • Kazuhiro Ueda

Abstract

This study explores the reasons for the slow price reactions to analysts' recommendation revisions. We predict that analysts' recommendation revisions contain earnings-related information that is not incorporated in analysts' earnings forecasts and that the slow price reaction is attributable to a gradual incorporation of this earnings-related information into stock prices. We find that, consistent with our prediction, stocks with recommendation upgrades subsequently experience more upward earnings forecast revisions than stocks with recommendation downgrades, and that the differences in subsequent stock returns between upgraded and downgraded stocks is attributable to differences between subsequent earnings forecast (especially, FY2 earnings forecast) revisions.

Suggested Citation

  • Kotaro Miwa & Kazuhiro Ueda, 2014. "Slow price reactions to analysts' recommendation revisions," Quantitative Finance, Taylor & Francis Journals, vol. 14(6), pages 993-1004, June.
    • Handle: RePEc:taf:quantf:v:14:y:2014:i:6:p:993-1004
    DOI: 10.1080/14697688.2013.869699
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    Cited by:

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    2. Miwa, Kotaro, 2022. "The informational role of analysts’ textual statements," Research in International Business and Finance, Elsevier, vol. 59(C).

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