Information Misweighting and Stock Recommendations
AbstractI provide evidence that analysts whose earnings forecast revisions showed signs of greater exaggeration in the past make recommendation changes that lead to lower abnormal returns than their peers. Interpreting stock recommendations as a forecast of future abnormal returns, I show that this evidence is consistent with the hypothesis that analysts who typically exaggerate or overstate the weight of their private information when issuing forecasts also do so when making recommendations. I also show that past earnings forecast provide incremental information about analysts' recommending behavior beyond that contained in past recommendations.
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Bibliographic InfoPaper provided by Institute for Financial Research in its series SIFR Research Report Series with number 59.
Length: 48 pages
Date of creation: 15 Jul 2007
Date of revision:
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Postal: Institute for Financial Research Drottninggatan 89, SE-113 60 Stockholm, Sweden
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More information through EDIRC
Information misweighting; stock recommendations; earnings forecasts; financial analysts;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
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