An Analysis of the Performance of Buy Recommendations of Stock-broking Firms in Singapore

Abstract

The study examines the ability of individual stock-broking firms in Singapore to make stock recommendations. Buy recommendations from January 1990 to December 1992 offour Singapore stock-broking firms were examined. The analysis reveals that only one firm's recommendations had an impact on stock prices on the day of purchase of the recommended stock. However, with the inclusion of transaction costs, no significant positive abnormal returns are detected. Only one firm was able to recommend stocks that earn significant positive abnormal returns, after transaction costs, for holding periods of up to three years. This firm also had one of the lowest coefficients of variation for each holding period.