Measuring the Added Value of Stock Recommendations

Anderson, Anders, Jones, Howard and Martinez, Jose Vicente (2018) Measuring the Added Value of Stock Recommendations. Saïd Business School Working Paper.


Using data from the Stockholm Stock Exchange we study the value added by (as distinct from the abnormal returns to) analysts’ recommendations. Recommending brokers’ clients trade profitably around positive recommendations at the expense of other brokers’ clients. Significant profits come from transactions before recommendation dates. Value added is greatest for upgrades to large caps, and largely insignificant for downgrades and recommendations of small caps, despite high abnormal returns.
Brokers making profitable recommendations generate abnormally high commission income, recouping much of their clients’ abnormal profits, and their abnormal commission income varies in line with the abnormal profits for their clients.

Item Type: Oxford Saïd Research Paper
Keywords: Finance, stock recommendations; performance evaluation; information leakages
Subject(s): Finance
Date Deposited: 03 Feb 2016 15:14
Last Modified: 24 Sep 2018 09:37

Actions (login required)

Edit View Edit View