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How Do Analyst Recommendations on Banks Respond to Monetary Policy News? An Application to the Eurozone

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  • Sophie Brana

    (BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Quentin Bro de Comères

    (LéP [Poitiers] - Laboratoire d'économie de Poitiers - UP - Université de Poitiers = University of Poitiers)

  • Anne-Gaël Vaubourg

    (LéP [Poitiers] - Laboratoire d'économie de Poitiers - UP - Université de Poitiers = University of Poitiers)

Abstract

We assess the extent to which stock analysts consider European Central Bank monetary policy decisions when formulating their investment recommendations on European banks from 2002 to 2020. To identify monetary policy shocks, we extract monetary policy factors from high-frequency rate movements surrounding monetary policy announcements. Our findings indicate that stock analysts are more concerned with nonstandard (or unconventional) monetary policy measures than standard policy measures. We also demonstrate that analysts interpret restrictive (accommodative) monetary surprises as positive (negative) news for bank financial health, particularly during periods characterised by high levels of financial uncertainty. Lastly, we emphasize that the reaction of stock recommendations to rate-and forward guidancerelated decisions is primarily influenced by the implicit disclosure of information on the economic outlook by the ECB along its monetary policy decision.

Suggested Citation

  • Sophie Brana & Quentin Bro de Comères & Anne-Gaël Vaubourg, 2024. "How Do Analyst Recommendations on Banks Respond to Monetary Policy News? An Application to the Eurozone," Post-Print hal-04986898, HAL.
    • Handle: RePEc:hal:journl:hal-04986898
    DOI: 10.1080/00036846.2024.2422110
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