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Full-Text Articles in Business
Is Sell-Side Research More Valuable In Bad Times?, Roger Loh, René M. Stulz
Is Sell-Side Research More Valuable In Bad Times?, Roger Loh, René M. Stulz
Research Collection Lee Kong Chian School Of Business
Because uncertainty is high in bad times, investors find it harder to assess firm prospects and, hence, should value analyst output more. However, higher uncertainty makes analysts’ tasks harder so it is unclear if analyst output is more valuable in bad times. We find that, in bad times, analyst revisions have a larger stock-price impact, earnings forecast errors per unit of uncertainty fall, reports are more frequent and longer, and the impact of analyst output increases more for harder-to-value firms. These results are consistent with analysts working harder and investors relying more on analysts in bad times.
Sell Side Benchmarks, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach
Sell Side Benchmarks, Ohad Kadan, Leonardo Madureira, Rong Wang, Tzachi Zach
Research Collection Lee Kong Chian School Of Business
Sell-side analysts employ different benchmarks when defining their stock recommendations. For example, a ‘buy’ for some brokers means the stock is expected to outperform its peers in the same sector (“sector benchmarkers”), while for other brokers it means the stock is expected to outperform the market (“market benchmarkers”), or just some absolute return (“total benchmarkers”). We explore the validity and implications of the adoption of these different benchmarks. Analysis of the relation between analysts’ recommendations and their long-term growth and earnings forecasts suggests that analysts indeed abide by their benchmarks: Sector benchmarkers rely less on across-industry information, and focus more …
When Are Analyst Recommendation Changes Influential?, Roger Loh, Rene M. Stulz
When Are Analyst Recommendation Changes Influential?, Roger Loh, Rene M. Stulz
Research Collection Lee Kong Chian School Of Business
The existing literature measures the contribution of analyst recommendation changes using average stock-price reactions. With such an approach, recommendation changes can have a significant impact even if no recommendation has a visible stock-price impact. Instead, we call a recommendation change influential only if it affects the stock price of the affected firm visibly. We show that only 12% of recommendation changes are influential. Recommendation changes are more likely to be influential if they are from leader, star, previously influential analysts, issued away from consensus, accompanied by earnings forecasts, and issued on growth, small, high institutional ownership, or high forecast dispersion …
Investor Inattention And The Underreaction To Stock Recommendations, Roger Loh
Investor Inattention And The Underreaction To Stock Recommendations, Roger Loh
Research Collection Lee Kong Chian School Of Business
Investors’ reaction to stock recommendations is often incomplete so that there is a predictable post-recommendation drift. I investigate investor inattention as a plausible explanation for this drift by using prior turnover as a proxy for attention. I find that low attention stocks react less to stock recommendations than high attention stocks around the three-day event window. Subsequently, the recommendation drift of firms with low attention is more than double in magnitude when compared to firms with high attention. Similar conclusions are reached with alternative proxies for attention. The evidence supports investor inattention as a source of the stock recommendation drift.
Industry Recommendations: Characteristics, Investment Value, And Relation To Firm Recommendations, Ohad Kadan, Madureira Leonardo, Rong Wang, Tzachi Zach
Industry Recommendations: Characteristics, Investment Value, And Relation To Firm Recommendations, Ohad Kadan, Madureira Leonardo, Rong Wang, Tzachi Zach
Research Collection Lee Kong Chian School Of Business
We study analysts’ industry recommendations. We find that the distribution of industry recommendations is quite balanced. Analysts show more optimism towards industries with high levels of R&D, past profitability and past returns. Industry recommendations possess investment value as portfolios based on these recommendations generate risk-adjusted abnormal returns. Finally, industry recommendations contain information which is orthogonal to that included in firm recommendations, and more so for brokers who benchmark their firm recommendations to industry peers. Consequently, the investment value of analysts’ recommendations is enhanced when both industry and firm recommendations are used.