Stock Prices and the Dissemination of Analysts' Recommendations

This article investigates alternative explanations for the significant stock-price reaction to analysts' information reported in the "Heard on the Street" column of the Wall Street Journal. The observed market reaction persists after eliminating firms with confounding releases and firms for which analysts' reports are issued immediately prior to publication. The evidence indicates that the column is not usually a secondary dissemination. First, stock prices adjust prior to publication when recommendations are reported on a single firm. Second, analysts have incentives to release information to the column before disseminating it to their clients. Overall, the evidence suggests that the "Heard on the Street" column gathers information, forms a consensus, and provides it to investors. Copyright 1991 by University of Chicago Press.