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Can Analysts Really Forecast? Evidence from the Karachi Stock Exchange

  • Haris Bin Jamil

    ()

    (BBA student at FAST National University, Peshawar, Pakistan.)

  • Aisha Ghazi Aurakzai

    ()

    (BBA student at FAST National University, Peshawar, Pakistan.)

  • Muhammad Subayyal

    ()

    (PhD scholar and assistant professor at FAST National University, Peshawar, Pakistan.)

Registered author(s):

    This study examines the impact of analysts’ recommendations on stock prices listed on the Karachi Stock Exchange for the period 2006–12. The recommendations are extracted from the daily Morning Shout report published by Khadim Ali Shah Bukhari Securities Ltd (KASB), which provides buy and sell recommendations for different stocks. We use the market model to estimate the abnormal returns around the recommendation dates for these securities. The study also investigates whether the abnormal returns are due to price pressure or information content. We find that investors earn abnormal returns on the basis of analysts’ recommendations for these securities. The results are robust in considering only the sub-sample subsequent to 2008’s global financial crisis, and are also consistent with the information content hypothesis and price pressure hypothesis.

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    Article provided by Department of Economics, The Lahore School of Economics in its journal Lahore Journal of Economics.

    Volume (Year): 19 (2014)
    Issue (Month): 1 (Jan-June)
    Pages: 91-109

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    Handle: RePEc:lje:journl:v:19:y:2014:i:1:p:91-109
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    1. 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.
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    16. Jegadeesh, Narasimhan & Kim, Woojin, 2006. "Value of analyst recommendations: International evidence," Journal of Financial Markets, Elsevier, vol. 9(3), pages 274-309, August.
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    18. Narasimhan Jegadeesh & Joonghyuk Kim & Susan D. Krische & Charles M. C. Lee, 2004. "Analyzing the Analysts: When Do Recommendations Add Value?," Journal of Finance, American Finance Association, vol. 59(3), pages 1083-1124, 06.
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