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Country-level analyst recommendations and international stock market returns

Author

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  • Berkman, Henk
  • Yang, Wanyi

Abstract

This study defines the aggregate analyst recommendation for a country as the value-weighted average of all outstanding recommendations for shares of firms incorporated in that country. We show that country-level analyst recommendations predict international stock market returns. A trading strategy based on country-level recommendations yields an abnormal return of around 1% per month. Aggregate recommendations also help to predict changes in gross domestic product and aggregate earnings surprises. Overall, we find that country-level analyst recommendations provide useful information to predict future aggregate cash flows and associated market returns across different countries.

Suggested Citation

  • Berkman, Henk & Yang, Wanyi, 2019. "Country-level analyst recommendations and international stock market returns," Journal of Banking & Finance, Elsevier, vol. 103(C), pages 1-17.
    • Handle: RePEc:eee:jbfina:v:103:y:2019:i:c:p:1-17
    DOI: 10.1016/j.jbankfin.2019.03.018
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    Citations

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    Cited by:

    1. Adam Zaremba, 2019. "The Cross Section of Country Equity Returns: A Review of Empirical Literature," JRFM, MDPI, vol. 12(4), pages 1-26, October.
    2. José Luis Miralles-Quirós & María Mar Miralles-Quirós & José Manuel Nogueira, 2020. "Sustainable Development Goals and Investment Strategies: The Profitability of Using Five-Factor Fama-French Alphas," Sustainability, MDPI, vol. 12(5), pages 1-16, February.
    3. Darko B. Vukovic & Vladislav Ugolnikov & Moinak Maiti, 2021. "Sell‐side analysts' recommendations a value or noise," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 3134-3151, April.
    4. José Luis Miralles-Quirós & María Mar Miralles-Quirós, 2020. "Who Knocks on the Door of Portfolio Performance Heaven: Sinner or Saint Investors?," Mathematics, MDPI, vol. 8(11), pages 1-18, November.
    5. Tiniç, Murat & Tanyeri, Başak & Bodur, Mehmet, 2021. "Who to trust? Reactions to analyst recommendations of domestic versus foreign brokerage houses in a developing stock market," Finance Research Letters, Elsevier, vol. 43(C).
    6. Mustafa Kevser & Mesut DoÄŸan & AyÅŸenur TarakçioÄŸlu Altinay, 2022. "The Impact Of Buy €“ Sell Recommendations On Banks’ Stock Returns," Baltic Journal of Economic Studies, Publishing house "Baltija Publishing", vol. 8(2).
    7. Kim, Karam & Ryu, Doojin & Yang, Heejin, 2021. "Information uncertainty, investor sentiment, and analyst reports," International Review of Financial Analysis, Elsevier, vol. 77(C).

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