Measuring the added value of stock recommendations

Jones, Howard, Anderson, Anders and Martinez, José Vicente Measuring the added value of stock recommendations. Journal of Financial and Quantitative Analysis. (Accepted)

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Abstract

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: Article
Keywords: stock recommendations; performance evaluation; information leakages; finance
Subject(s): Finance
Date Deposited: 08 Feb 2019 15:38
Last Modified: 08 Feb 2019 15:38
Funders: n/a
URI: http://eureka.sbs.ox.ac.uk/id/eprint/7283

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