Bucking the Trend: The Informativeness of Analyst Contrarian Recommendations

This paper examines price reactions to analysts’ recommendations issued in the opposite direction of recent stock price movements. We find that upgrade and downgrade contrarian recommendations induce larger market reactions than noncontrarian recommendations, consistent with the view that they are more informative. These results are strongest in the period before Regulation Fair Disclosure, consistent with the view that private information was likely curbed after its implementation. Contrarian downgrades are more likely to be issued by all‐star analysts, but less likely by experienced and busy analysts suggesting that contrarian recommendations are subject to career concerns.     

Behavioural Bias and Conflicts of Interest in Analyst Stock Recommendations

Abstract:  This paper tests whether sell-side analysts are prone to behavioural errors when making stock recommendations as well as the impact of investment banking relationships on their judgments. In particular, we analyse their report narratives for evidence of cognitive bias. We find first that new buy recommendations on average have no investment value whereas new sell recommendations do, and take time to be assimilated by the market. We also show that new buy recommendations are distinguished from new sells both by the level of analyst optimism and representativeness bias as well as with increased conflicts of interest. Successful new buy recommendations are characterised by lower prior returns, value stock status, smaller firms and weaker investment banking relationships. On the other hand, successful new sells do not differ from their unsuccessful counterparts in terms of these measures. As such, we provide evidence that analysts are prone both to behavioural bias as well as potential conflicts of interest in their new buy stock recommendation decisions. We also show that these two explanations of analyst behaviour are to a great extent independent of each other. Consequently, the recent attempts by regulators to address potential conflicts of interest in analyst behaviour may have only limited impact.     

Favorable versus Unfavorable Recommendations: The Impact on Analyst Access to Management-Provided Information

This study examines recent regulatory and practitioner concerns that managers provide more (less) information to analysts with more (less) favorable stock recommendations. We examine the relative forecast accuracy of analysts before and after a recommendation issuance under the assumption that increases (decreases) in management‐provided information will increase (decrease) analysts' relative forecast accuracy. We find that analysts issuing more favorable recommendations experience a greater increase in their relative forecast accuracy compared with analysts with less favorable recommendations. Additional tests on the change in frequency with which analysts issue forecasts independent of or in conjunction with other analysts after their recommendation change yield corroborating results. In addition, we find that the greater increase in relative accuracy for analysts with more favorable recommendations exists prior to the passage of Regulation FD but not after. The combined results are consistent with analysts receiving relatively more management‐provided information following the issuance of more favorable recommendations.     

Competing for Securities Underwriting Mandates: Banking Relationships and Analyst Recommendations

We investigate whether analyst behavior influenced banks' likelihood of winning underwriting mandates for a sample of 16,625 U.S. debt and equity offerings in 1993–2002. We control for the strength of the issuer's investment banking relationships with potential competitors for the mandate, prior lending relationships, and the endogeneity of analyst behavior and the bank's decision to provide analyst coverage. Although analyst behavior was influenced by economic incentives, we find no evidence that aggressive analyst behavior increased their bank's probability of winning an underwriting mandate. The main determinant of the lead‐bank choice is the strength of prior underwriting and lending relationships.     

The Reluctant Analyst

We estimate the dynamics of recommendations by financial analysts, uncovering the determinants of inertia in their recommendations. We provide overwhelming evidence that analysts revise recommendations reluctantly, introducing frictions to avoid frequent revisions. More generally, we characterize the sources underlying the infrequent revisions that analysts make. Publicly available data matter far less for explaining recommendation dynamics than do the recommendation frictions and the long‐lived information that analysts acquire but the econometrician does not observe. Estimates suggest that analysts structure recommendations strategically to generate a profitable order flow from retail traders. We provide extensive evidence that our model describes how investors believe analysts make recommendations, and that investors value private information revealed by analysts' recommendations.     

承销商分析师与非承销商分析师利益冲突比较研究

基于证券分析师首次发表的关于2006~2008年A股市场IPO股票的研究报告数据,运用非参数检验与多元回归分析方法,对我国证券分析师利益冲突行为进行实证分析。研究结果表明,承销商分析师与非承销商分析师均存在乐观倾向,而且承销商分析师的投资评级更为乐观;市场对于承销商分析师与非承销商分析师关注股票的反应并无显著差异,表明我国证券市场投资者并没有认识到分析师的利益冲突行为。     

The Two Faces of Analyst Coverage

We find that positive excess (strong) analyst coverage is associated with overvaluation and low future returns. This finding is consistent with the view that excessive analyst coverage, driven by investment banking incentives and analyst self-interests, raises investor optimism causing share prices to trade above fundamental value. However, weak analyst coverage causes stocks to trade below fundamental values. This finding indicates that investors tend to believe that these firms are more likely to be plagued by information asymmetries and agency problems. The results remain robust after controlling for the possible endogenous nature of analyst coverage and analysts' self-selection bias.     

The First Analyst Coverage of Neglected Stocks

We examine the first analyst coverage of 549 “neglected” stocks that publicly traded at least one year without research coverage. The stocks experience a +4.86% abnormal return at initiation announcement. Positive returns are driven by positive coverage and not the mere introduction of coverage. Initiations from investment banks elicit lower announcement returns if the bank had a prior business relationship with the covered firm. Research firms paid by the covered company to provide coverage elicit announcement returns that are not significantly different from other analysts. Announcement returns are also influenced by liquidity increases and factors consistent with downward-sloping demand curves.     

证券分析师VS统计模型:证券分析师盈余预测的相对准确性及其决定因素

本文使用2005年35家券商对我国上市公司做出的每股盈余预测数据,考察了证券分析师盈余预测相对于统计模型的相对准确性及其决定因素。我们发现,我国证券分析师做出的盈余预测,同以年度历史数据为基础的统计模型得出的盈余预测相比,预测误差较小,证券分析师盈余预测具有一定的优势;但同某些以季度历史数据为基础的统计模型得出的盈余预测相比,预测误差较大,证券分析师盈余预测不具有优势。我们同时考察了决定证券分析师盈余预测相对准确性的决定因素。我们发现,公司每股盈余的波动性越大,公司上市越晚,跟踪公司的分析师越多,证券分析师的优势就越大。我们的研究对证券分析师以及投资者都有一定的启示作用。     

Structural Breaks and Predictive Regression Models of Aggregate U.S. Stock Returns

In this article we examine the structural stability of predictiveregression models of U.S. quarterly aggregate real stock returnsover the postwar era. We consider predictive regressions modelsof S&P 500 and CRSP equal-weighted real stock returns basedon eight financial variables that display predictive abilityin the extant literature. We test for structural stability usingthe popular Andrews SupF statistic and the Bai subsample procedurein conjunction with the Hansen heteroskedastic fixed-regressorbootstrap. We also test for structural stability using the recentlydeveloped methodologies of Elliott and Müller, and Baiand Perron. We find strong evidence of structural breaks infive of eight bivariate predictive regression models of S&P500 returns and some evidence of structural breaks in the threeother models. There is less evidence of structural instabilityin bivariate predictive regression models of CRSP equal-weightedreturns, with four of eight models displaying some evidenceof structural breaks. We also obtain evidence of structuralinstability in a multivariate predictive regression model ofS&P 500 returns. When we estimate the predictive regressionmodels over the different regimes defined by structural breaks,we find that the predictive ability of financial variables canvary markedly over time.     

The Effect of Multinationality on Security Analyst Underreaction

Previous research presented evidence of bias and positive serial correlation in forecast errors suggesting that analysts do not properly recognize the time–series properties of earnings when setting expectations of future earnings. A reason for the security analyst underreaction is the level of multinationality of the firm's activities. This study shows that analysts underreact to prior information more as the level of multinationality of the firm examined increases.     

股吧评论、分析师跟踪与股价崩溃风险——关于模糊信息的信息含量分析

东方财富股吧等股票论坛日渐活跃,反映了投资者对获得上市公司真实、完整、及时信息的强烈需求。尽管股吧有助于促进信息传播,但仍是非正式的信息发布平台,股吧评论本质上是一种模糊信息。为探明股吧评论的信息含量,本文以2012—2017年A股上市公司为研究样本,研究股吧评论对股价崩溃风险的影响,以及同样属于模糊信息的分析师跟踪在这一过程中可能产生的作用。实证结果表明,股吧评论分歧越小,股价崩溃风险越大,并且分析师跟踪人数和研报数量在上述影响过程中发挥中介作用。研究结果有助于厘清股吧评论影响股价崩溃风险的路径和机理,既丰富了股价崩溃风险成因的研究,也揭示了股吧评论、分析师跟踪等模糊信息的信息含量。     

美国特许金融分析师认证体系分析

美国“特许金融分析师”(Chartered Financial Analyst，简称CFA)是一种金融投资从业专业资格认证。自从1962年1月，美国“投资管理与研究协会”(AIMR)，通过授予CFA称号来确认从业人员具有高级专业资格。美国投资管理研究协会(AIMR)的“特许金融分析师”认证体系值得我们借鉴。培养和认证中国高级金融分析师，将提高我国金融从业人员的整体素质，增强我国金融业在国际金融市场的竞争力。     

The Local Aggregate Effects of Minimum Wage Increases

Using variation in minimum wages across cities and controlling for differences in business-cycle factors and long-run local economic trends, we find that following minimum wage increases, both, prices and nominal spending rise modestly. These gains are larger for certain subcategories of goods such as food away from home and in locations where low-wage workers account for a larger share of employment. Further, minimum wage increases are associated with reduced total debt among households with low credit scores, higher auto debt, and increased access to credit.     

The Inefficiency of the Mean Analyst Forecast as a Summary Forecast of Earnings

We show analytically that mean analyst forecasts inefficiently aggregate information by assigning too much weight to analysts' common information relative to their private information when used as a summary forecast measure of forthcoming earnings. A more precise summary forecast of earnings than the current mean forecast is the current mean forecast plus a positive multiple of the change in the mean forecast.     

Analyst cash flow forecasts and pricing of accruals

This paper investigates how analyst cash flow forecasts affect investors' valuation of accounting accruals. We find that the strength of the accrual anomaly documented in Sloan (1996) is weaker for firms with analyst cash flow forecasts, after controlling for idiosyncratic risk, transaction costs and firm characteristics associated with the issuance of cash flow forecasts. We further show that this reduction in mispricing of accounting accruals is at least partially attributed to the improved ability of investors to price earnings manipulations imbedded in accruals. We investigate several non-mutually exclusive alternative explanations for this improvement in investors' ability and demonstrate that the increased investor attention and the improved accuracy of analyst earnings forecasts both contribute to the mitigation of the accrual anomaly.     

Analyst forecast characteristics and the cost of debt

We examine the relation between analyst forecast characteristics and the cost of debt financing. Consistent with the view that the information contained in analysts’ forecasts is economically significant across asset classes, we find that analyst activity reduces bond yield spreads. We also find that the economic impact of analysts is most pronounced when uncertainty about firm value is highest (that is, when firms have high idiosyncratic risk). Our findings are robust to controls for private information in equity prices and level of corporate disclosures. Overall, the results indicate that the information contained in analyst forecasts is valued outside the equity market and provide an additional channel in which better information is associated with a lower cost of capital.     

Analyst recommendations and the implied cost of equity

We investigate the relation between analyst recommendations and the cost of equity implied by current stock price and earnings forecasts. Contrary to expectations, previous-year recommendation upgrades are associated with increases in the current cost of equity; and past increases in the cost of equity are associated with current recommendation downgrades. Furthermore, changes in the implied cost of equity and changes in analyst recommendations jointly explain as much as 31% of the variation in 1-year holding period returns, where most of the variation (28%) is explained by the implied cost of equity alone. We document that when forming recommendations, analysts underestimate the role of the cost of equity.