JournalsKart submission@journalskart.com 8882640642, 011-43101010
Register Login
Peer-Reviewed Open Access Journal

DIAS Technology Review

The Institute has a unique distinction of publishing a bi-annual International journal DIAS Technology Review – The International Journal for Business and IT. The Editorial Board comprises of...

P-ISSN: 0972-9658 English Since 2004
Submit Manuscript Browse Archives
Current Issue

Vol. 7 No. 1 (2010)

Articles 13 th Edition of DTR Apr 2010 – Sep 2010
DOI 10.65301/dias.2010.7.1.357

A Study of Investment Performance and Impact of Stock Analysts’ Recommendations

Authors
KA
Kapil Choudhary
SU
Sushil Bajaj
75 Views
127 Downloads
Published 2010-04-30
Pages 34-51
Abstract

Information available in the market is an important source for making investment decisions in the stock market. The objective of this study is to examine the value of analysts’ services for investors and to explore the presence of announcement effects of their recommendations on stock market return behavior. The study considers 222 buy recommendations and covers the period from July 4, 2005, to December 31, 2007.


The Sharpe Performance Measure is used to assess the impact of analysts’ recommendations on investment performance. The findings reveal the absence of any significant association between abnormal returns and the recommendations provided by equity analysts. However, the results related to holding periods offer some interesting insights. A one-week holding period following the recommendations results in inferior investment performance, whereas a one-year holding period yields the highest inferior investment performance.

Keywords
Investment Stock Analyst Performance Announcement Effect Recommendation
References
  1. Ball, R. and Brown, P. (1968), “An Empirical Evaluation of Evaluating Accounting Income Numbers”, Journal of Accounting Research, Vol. 6, pp. 159–178.
  2. Bangoli, M., Clement, M., Crawley, M., and S. Watts. (2009), “The Profitability of Analysts’ Stock Recommendations: What Role Does Investor Sentiment Play” [Cited 2010 January 29]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1430617
  3. Barber, B., Lehavy, R., & B. Trueman. (1999), “Brokerage Houses and Their Stock Recommendations: Does superior Performance Persist” [Cited 2010 January 29]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=269119
  4. .
  5. Barber, B., Lehavy, R., NcNichols, M. and B. Trueman. (2001), “Can investors profit from the prophets: Security analyst recommendations and stock returns”, Journal of Finance, 56, pp. 531–563.
  6. Barber, B. M. and Loeffler, D. (1993), “The Dartboard Column: Second Hand Information and Price Pressure”, Journal of Financial and Quantitative Analysis, June, Vol. 28(2) pp. 273–284.
  7. Barniv, R., Hope, O.K., Myring, M., and W.B. Thomas. (2010), “International Evidence on Analyst Stock Recommendations, Valuations, and Returns” [Cited 2010 January 29]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1350616
  8. Chakrabarti, Rajesh. (2003), “Should You Bet on Your Broker’s Advice: A Study of Analysts’ Recommendations in India” [Cited 2010 January 29]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=649844
  9. .
  10. Chen Xia and Qiang Chang. (2003), “What determines the market impact of stock recommendations” [Cited 2010 January 30]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=385524
  11. Cliff, Michael T. and Virginia Tech. (2004), “Do Independent Analysts Provide Superior Stock Recommendations” [Cited 2010 January 30]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=540123
  12. Fama, E. F., Fisher, L., Jensen, M. C. and Roll, R. (1969), “The Adjustment of Stock Prices to New Information”, International Economic Review, Vol. 10, pp. 1–21.
  13. Glezakos, M. and Mylonas P. (2003), “The Small Size Effect is Still Present on the Athens Stock Exchange”, European Research Studies Vol. 6 – Issue 3–4, pp. 7.
  14. Glezakos, M. (1995), “The Effect of Accounting Profitability on stock Returns – The Case of the ASE”, SPOUDAI, 1995.
  15. Hall, J.L., and P.B. Tacon. (2009), “Forecast Accuracy and Stock Recommendations” [Cited 2010, January 24]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1011392
  16. Holloway, C. (1981), “A Note on Testing an Aggressive Investment Strategy, Using Value Line Ranks”, Journal of Finance, pp. 711–719.
  17. Kerl, A.G., and A. Walter. (2007), “Long-run Performance Evaluation of Journalists’ Stock Recommendation” [Cited 2010, January 24]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=956079
  18. Krische, S.D., and Charles, M.C. Lee. (2000), “The Information Content of Analyst Stock Recommendations” [Cited 2010, January 24]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=254547
  19. Schlumpf, Philipp M., Schmid, Markus M. and Heinz Zimmermann. (2004), “The First and Second Hand Effect of Analysts’ Stock Recommendations: Evidence from the Swiss Stock Market.” [Cited 2010, January 24]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=657701
  20. Schuster, Thomas. (2003), “Fifty-Fifty: Stock Recommendations and Stock Prices. Effects and Benefits of Investment Advice in the Business Media” [Cited 2010, January 24]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=387341
  21. Sharpe, William F. (1966), “Mutual Fund Performance”, Journal of Business, Vol. 39, pp. 119–138
  22. Walker, M. M. and Hatfield, G. B., (1996), “Professional Stock Analysts’ Recommendations: Implications for Individual Investors”, Financial Services Review, Vol. 5, pp 13–29.
  23. Wnayama, M. Robert Melo. (2008), “A Survey of Analysts Stock Recommendations: Are they really useful?” [Cited 2010, January 24]; Online; Available from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1336343
  24. Womack, K. (1996), “Do Brokerage Analysts Recommendations Have Investment Value?” Journal of Finance, Vol. 51, pp 137–167.
Download
pdf
How to Cite
Kapil Choudhary, Sushil Bajaj . (2010). A Study of Investment Performance and Impact of Stock Analysts’ Recommendations. DIAS Technology Review, 7(1), 34-51.
About This Journal
DIA
DIAS Technology Review
Published by Journalskart
P-ISSN 0972-9658
✓ Citation copied to clipboard