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Stock Recommendations in Swedish Printed Media: Leading or Misleading?

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  • Lidén, Erik R.

    ()
    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

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    Abstract

    This paper analyzes the initiated and changed recommendations published in six well-known Swedish newspapers and business magazines for the period 1996-2000 using a buy-and-hold abnormal returns(BHARs) approach. The results distinguish between recommendations from analysts and journalists. Buy recommendations were misleading investors, whereas sell recommendations were leading them, overall yielding returns in line with the market. This asymmetry is due to positive information from the management of the company being more intricate to interpret than negative. The information provided by management is generally positively biased, both for good and bad information. This phenomenon holds for recommendations from both analysts and journalists. Following buy- and sell recommendations from analysts yielded BHARs in line with the BHARs from following journalist recommendations, which in turn give rise to returns in line with the market.

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    File URL: http://hdl.handle.net/2077/2750
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    Bibliographic Info

    Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 99.

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    Length: 24 pages
    Date of creation: 11 May 2003
    Date of revision: 19 Sep 2003
    Handle: RePEc:hhs:gunwpe:0099

    Contact details of provider:
    Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
    Phone: 031-773 10 00
    Web page: http://www.handels.gu.se/econ/
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    Related research

    Keywords: Stock recommendations; EMH; Printed media; Initiatiation; Information asymmetry;

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    1. Mark L. Mitchell & Erik Stafford, 1997. "Managerial Decisions and Long-Term Stock Price Performance," CRSP working papers 453, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
    2. Kothari, S. P. & Warner, Jerold B., 1997. "Measuring long-horizon security price performance," Journal of Financial Economics, Elsevier, vol. 43(3), pages 301-339, March.
    3. Bjerring, James H & Lakonishok, Josef & Vermaelen, Theo, 1983. " Stock Prices and Financial Analysts' Recommendations," Journal of Finance, American Finance Association, vol. 38(1), pages 187-204, March.
    4. Mandelker, Gershon, 1974. "Risk and return: The case of merging firms," Journal of Financial Economics, Elsevier, vol. 1(4), pages 303-335, December.
    5. John D. Lyon & Brad M. Barber & Chih-Ling Tsai, 1999. "Improved Methods for Tests of Long-Run Abnormal Stock Returns," Journal of Finance, American Finance Association, vol. 54(1), pages 165-201, 02.
    6. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    7. Jaffe, Jeffrey F, 1974. "Special Information and Insider Trading," The Journal of Business, University of Chicago Press, vol. 47(3), pages 410-28, July.
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