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Information Misweighting and Stock Recommendations

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  • Martinez, Jose Vicente

    (Swedish Institute for Financial Research)

Abstract

I provide evidence that analysts whose earnings forecast revisions showed signs of greater exaggeration in the past make recommendation changes that lead to lower abnormal returns than their peers. Interpreting stock recommendations as a forecast of future abnormal returns, I show that this evidence is consistent with the hypothesis that analysts who typically exaggerate or overstate the weight of their private information when issuing forecasts also do so when making recommendations. I also show that past earnings forecast provide incremental information about analysts' recommending behavior beyond that contained in past recommendations.

Suggested Citation

  • Martinez, Jose Vicente, 2007. "Information Misweighting and Stock Recommendations," SIFR Research Report Series 59, Institute for Financial Research.
    • Handle: RePEc:hhs:sifrwp:0059
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    References listed on IDEAS

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    More about this item

    Keywords

    Information misweighting; stock recommendations; earnings forecasts; financial analysts;
    All these keywords.

    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
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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