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Isolating the Information Content of Equity Analysts' Recommendation Changes, Post Reg FD

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  • Delbert Goff
  • Heather Hulburt
  • Terrill Keasler
  • Joe Walsh

Abstract

We investigate the information content of equity analysts' recommendation changes subsequent to the passage of Regulation Fair Disclosure. We find that analyst upgrades (downgrades) are associated with positive (negative) abnormal returns. Overall, stock prices tend to react significantly more strongly to recommendation changes accompanied by news events than to those that are not. Even so, returns around recommendation changes not accompanied by news are significantly different from zero. This result holds after controlling for firm-specific variables and the incidence of multiple simultaneous recommendation changes. We conclude that analyst recommendation changes, in and of themselves, are informative. Copyright (c)2008, The Eastern Finance Association.

Suggested Citation

  • Delbert Goff & Heather Hulburt & Terrill Keasler & Joe Walsh, 2008. "Isolating the Information Content of Equity Analysts' Recommendation Changes, Post Reg FD," The Financial Review, Eastern Finance Association, vol. 43(2), pages 303-321, May.
  • Handle: RePEc:bla:finrev:v:43:y:2008:i:2:p:303-321
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    Cited by:

    1. Li Eng & Joohyung Ha & Sandeep Nabar, 2014. "The impact of regulation FD on the information environment: evidence from the stock market response to stock split announcements," Review of Quantitative Finance and Accounting, Springer, vol. 43(4), pages 829-853, November.
    2. repec:kap:rqfnac:v:50:y:2018:i:3:d:10.1007_s11156-017-0644-y is not listed on IDEAS
    3. Premti, Arjan & Garcia-Feijoo, Luis & Madura, Jeff, 2017. "Information content of analyst recommendations in the banking industry," International Review of Financial Analysis, Elsevier, vol. 49(C), pages 35-47.
    4. 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.

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