The Good, The Bad, and The Lucky: Projected Earnings Accuracy and Profitability of Stock Recommendations

The Value of Ranked Analysts’ Recommendations

“…Although some studies show that analysts exhibit a persistent ability to issue accurate forecasts (Bradshaw et al, 2012 andBilinski et al, 2013) and, on average, the recommendations have significant investment value (Womack, 1996;Barber et al, 2001;Jegadeesh et al, 2004;Green, 2006), other researchers conclude that the past accuracy of earnings expectations and previous profitability of recommendations do not provide essential information for investment decisions (Stickel, 1995;Sorescu and Subrahmanyam, 2006;Hall and Tacon, 2010;Hess et al, 2012). Moreover, fewer studies have examined the relationship between analysts' rankings and the profitability of their recommendations (Leone and Wu, 2007;Groysberg et al, 2008;Emery and Li, 2009;Fang and Yasuda, 2014).…”