| Abstract: | We examine the reaction of stocks and the response of financial analysts' earnings forecasts to securities recommended as “Stock Highlights” by Value Line Investment Survey. Significant abnormal returns appear around the publication of stock highlights. Stock price responses are relatively efficient and permanent. Using earnings expectation data provided by the Institutional Brokers Estimate System, we find analysts raise their forecasts significantly following Value Line recommendations. Near-term forecast revisions are significantly related to stock returns at the time of the recommendations. Thus, an explanation for Value Line's security recommendation success is its ability to generate firm-specific earnings information. |
