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Can Analysts Really Forecast? Evidence from the Karachi Stock Exchange

Author

Listed:
  • 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.)

Abstract

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.

Suggested Citation

  • Haris Bin Jamil & Aisha Ghazi Aurakzai & Muhammad Subayyal, 2014. "Can Analysts Really Forecast? Evidence from the Karachi Stock Exchange," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(1), pages 91-109, Jan-June.
  • Handle: RePEc:lje:journl:v:19:y:2014:i:1:p:91-109
    as

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    File URL: http://121.52.153.179/JOURNAL/LJE%20VOL%2019-1/Jamil,%20Aurakzai%20and%20Subayyal.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Analysts’ recommendations; information content; price pressure; abnormal returns; market efficiency; Pakistan;

    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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