Professional Stock Analysts’ Recommendations

Walker, M. Mark

doi:10.1016/s1057-0810(96)90024-4

Cited by 18 publications

(11 citation statements)

References 16 publications

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“…Research on the role of recommendations in the investment process and their effectiveness in valuing listed companies is ambiguous. The first study of the impact of recommendations on price changes revealed that most of the recommendations did not constitute a significant source of information to the advantage of its holder (Cowles, 1933), as was also confirmed by Walker and Hatfield (1996). Stickel (1995) noted that the impact of stock market recommendations on investment decisions of investors varies, which is conditioned by the fact that investors, following the reputation of a brokerage house, do not treat all recommendations in the same way.…”

Section: Importance Of Stock Market Recommendationsmentioning

confidence: 99%

Perception of the Effectiveness of Stock Market Recommendations in Relation to Their Real Marketability

Keller

2019

Folia Oeconomica

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The purpose of this paper is to evaluate the effectiveness of stock market recommendations as a factor supporting investment decisions, both in objective and subjective terms. The applicative objectivity of using recommendations is visualized by indicating their real impact on achieving an above‑average return. Subjective utility refers to the perception of recommendations directly by their recipients, including individual investors. For this purpose, a survey was conducted on a group of 564 respondents whose structure is representative of stock market investors in Poland and the results of the survey were verified by conducting statistical analyses (logit models) on the example of selected brokerage houses indicated by investors as the most and least effective in the prediction. The analyses conducted show an ambiguous perception of stock market recommendations by investors. According to investors, the usefulness of stock recommendations issued by individual brokerage houses varies, resulting in different possibilities of generating income using these reports. The responses of respondents to the objective results of investment models using information from stock market recommendations also indicate that individual perceptions of investors’ recommendations do not necessarily translate into their actual usefulness.

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Section: Importance Of Stock Market Recommendationsmentioning

confidence: 99%

Perception of the Effectiveness of Stock Market Recommendations in Relation to Their Real Marketability

Keller

2019

Folia Oeconomica

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“…In his research he received a variety of results for different institutions -that means that investors do not treat all recommendations in the same way. However, the analyses made by Walker and Hatfield [1996] showed that investors do not have additional benefits coming from the use of recommendations. In a study made by Clark et al the recommendations issued in 1995-2001 were tested.…”

Section: Previous Studiesmentioning

confidence: 99%

Stock Exchange Recommendations and Economic Realities

Pastusiak

Keller

2015

Przedsiebiorczosc I Zarzadzanie

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The aim of this paper is to present the impact of stock recommendations on the prices in the context of excessive optimism heuristic. The main goal of the conducted analysis is to show that investors on the Warsaw Stock Exchange seem to ignore the economic information that comes with the recommendation report. Also, as the analyzed recommendations are set in the specified economic conditions, authors would like to show that reports are biased with excessive optimism. The research of the structure of recommendations was issued for the biggest companies of the Polish market listed on the Warsaw Stock Exchange from 2009 to 2012. The investigation showed that the ambiguity of the creation methods of analytical reports and differences in valuation of companies causes subjectivism in analysts' assessments, which leads to heuristic effects. According to the authors, the structure of reports and their specificity shows that excessive optimism is an important factor in creation of stock exchange recommendations. Key words: stock recommendations, capital market, behavioral finance, Warsaw Stock Exchange, excessive optimism heuristic. JEL classification: G11, G14, G16, G15 114 IntroductionThe stock exchange recommendations published by brokerage houses are an important part of the capital market. The report of this type is the opinion of the analyst representing financial market institutions, intended to assess the situation of the company in a professional way and to provide customers of these institutions with comprehensive information, allowing gaining advantage over other market participants. Analyst issues recommendation after a detailed assessment of the company, but the implemented methodology makes the recommendation his subjective opinion. At the time of publication on the market, the report is fully opened and accessible for anyone.The impact of recommendations on the quotations of companies has been the point of interest of researchers since the beginning of the twentieth century. Depending on the market and type of security, the obtained results of research on the impact of recommendations seem to be different. The available studies results show that there are different types of approach to the problem of the recommendations impact. Especially their noticeable effect on prices or lack thereof is observed.The research problem set by the authors was an attempt to confirm that stock recommendations have an effect on the stock prices. Secondly they would like to show that excessive optimism heuristic is an important element in the process of constructing recommendations by the analysts. Behavioral context of conducted analyses results from the fact that the target prices and the recommendations themselves are determined not only by mathematical calculations. Despite a number of established procedures and schemes used in the valuation process, the calculations are still based on subjective assumptions and judgments. It should also be noted that final results of the forecasts are adjusted by analysts in a sub...

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“…The most widely accessed sites both by brokerage firms as well as investors, were selected. Similar studies, used newspaper information like "USA Today" and "Wall Street Journal" in Barber and Loefler (1993), Lieu, Smith and Syed (1993), Holloway (1981 and1983), Walker and Hatfield (1996) etc. Recent works derived information from "Zacks Investment Research", which includes a large number of recommendations (over 400,000) since 1985.…”

Section: The Samplementioning

confidence: 99%

“…The Wall Street Journal evaluated the effectiveness of analysts" recommendations, comparing the results with those of a group of stocks selected at random (dartboard portfolio) and also with the Dow Jones. The outcome from this comparative study was that the analysts" perform slightly better, if one does not take into account dividends and investors" risk (Walker and Hatfield, 1996). Barber, Lehany McNichols and Trueman (2001), utilizing data from Zack"s data base, found an excess return of 4% for stocks which attracted a "strong buy" recommendation.…”

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confidence: 98%

“…On the other hand, Copeland and Myers (1982), utilizing data from Value Line, reached the reverse conclusion. Similarly, Walker and Hatfield (1996), concluded that individual investors experience inferior performance by following analysts" recommendations published in the "Market Highlights" of "USA Today". However, it must be pointed out that most studies with positive results, do not consider transaction costs, which are substantial, mainly because all methodologies which lead to excess returns assume daily rebalancement of the formed portfolios.…”

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confidence: 99%

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The Impact Of Analysts‟ Recommendations: Evidence From The Athens Stock Exchange

Glezakos

Merika

2011

JABR

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This study aims to investigate the usefulness of analysts’ recommendations on firms listed on the Athens Stock Exchange (ASE). It contradicts the majority of published works which conclude that analysts’ recommendations do offer valuable investment opportunities. The unique feature of this work is that it sheds light on the issue, adopting a practical approach stemming from the investor’s point of view. It is shown through an event study methodology, that analysts’ recommendations do not result to any significant excess returns.

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Professional Stock Analysts’ Recommendations

Cited by 18 publications

References 16 publications

Perception of the Effectiveness of Stock Market Recommendations in Relation to Their Real Marketability

Perception of the Effectiveness of Stock Market Recommendations in Relation to Their Real Marketability

Stock Exchange Recommendations and Economic Realities

The Impact Of Analysts‟ Recommendations: Evidence From The Athens Stock Exchange

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