The price impact of analyst revisions and the state of the economy: Evidence around the world

Abstract

This paper examines the price impact of analyst revisions in distinct economic states around the world. We find stronger average 2‐day cumulative abnormal returns in bad times, though this pattern is mainly observed in developed countries. In addition, trading strategies following analyst revisions, with holding periods from 1 to 6 months, are generally more profitable in good times with lower macroeconomic uncertainty, after controlling for market and common risk factors. The profitability, however, disappears or declines substantially after accounting for time‐varying risk premia conditioned on lagged macroeconomic information, indicating a reduced information production role played by analysts in recent decades.