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Local predictive ability of analyst recommendations

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  • Serkan Karadas
  • Jorida Papakroni

Abstract

This article shows that locally aggregated analyst recommendations at the Metropolitan Statistical Area (MSA‐) or state‐level predict future locally aggregated excess returns. The results hold even after controlling for macroeconomic variables, industry and market returns, as well as investor sentiment. We also show that the local predictive ability of analyst recommendations is stronger for geographically concentrated firms. Additional analysis at the state‐level for the geographically concentrated firms reveals that locally aggregated analyst recommendations predict future local economic fundamentals. Overall, our findings suggest that analyst recommendations contain information at the MSA‐ and state‐level, and that local information content is richer for geographically concentrated firms.

Suggested Citation

  • Serkan Karadas & Jorida Papakroni, 2019. "Local predictive ability of analyst recommendations," Review of Financial Economics, John Wiley & Sons, vol. 37(3), pages 351-371, July.
  • Handle: RePEc:wly:revfec:v:37:y:2019:i:3:p:351-371
    DOI: 10.1002/rfe.1055
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