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The First- and Second-Hand Effect of Analysts' Stock Recommendations: Evidence from the Swiss Stock Market

Author

Listed:
  • Philipp M. Schlumpf
  • Markus M. Schmid
  • Heinz Zimmermann

Abstract

"This paper empirically investigates the impact of both the first release of analysts' stock recommendations to a limited clientele and the subsequent dissemination of the same information in a major newspaper to a broader audience. For a sample of 1460 stock recommendations published in FuW, Switzerland's major financial newspaper, significant positive abnormal returns on the day of the original release of buy recommendations and on the day of publication in FuW are documented. Tests of the price pressure and information hypotheses reveal that analysts' recommendations contain new information, which is quickly incorporated in the stock prices on the first release of this information. In contrast, the statistically significant announcement effects associated with the subsequent publication can be primarily ascribed to price pressure in the underlying securities." Copyright (c) 2008 The Authors Journal compilation (c) 2008 Blackwell Publishing Ltd.

Suggested Citation

  • Philipp M. Schlumpf & Markus M. Schmid & Heinz Zimmermann, 2008. "The First- and Second-Hand Effect of Analysts' Stock Recommendations: Evidence from the Swiss Stock Market," European Financial Management, European Financial Management Association, vol. 14(5), pages 962-988.
  • Handle: RePEc:bla:eufman:v:14:y:2008:i:5:p:962-988
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-036X.2007.00435.x
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    Cited by:

    1. Anolli, Mario & Beccalli, Elena & Molyneux, Philip, 2014. "Bank earnings forecasts, risk and the crisis," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 29(C), pages 309-335.
    2. Vithessonthi, Chaiporn & Techarongrojwong, Yaowaluk, 2013. "Do monetary policy announcements affect stock prices in emerging market countries? The case of Thailand," Journal of Multinational Financial Management, Elsevier, vol. 23(5), pages 446-469.
    3. Devos, Erik & Hao, Wei & Prevost, Andrew K. & Wongchoti, Udomsak, 2015. "Stock return synchronicity and the market response to analyst recommendation revisions," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 376-389.

    More about this item

    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

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