The correlation between stock returns before and after analyst recommendation revisions

In this study I analyse the correlation between stock returns before and after analyst recommendation revisions. I hypothesise that if a recommendation revision for a given stock takes place after a short period when the stock?s price moves in the opposite direction, it may indicate that the fundamentals that caused the analyst to revise their recommendation are less completely (if at all) incorporated in the stock price, significantly increasing the probability of subsequent post-event price drift. Analysing a large sample of recommendation revisions, I document that both recommendation upgrades and downgrades are followed by significant one-tosix-month price drifts (reversals) if they are preceded by the opposite-sign (same-sign) short-term cumulative abnormal returns. The effect remains significant after accounting for additional relevant company specific (size, Market Model beta, historical volatility) and event-specific (stock?s return and trading volume on the event day, brokerage firm size, analyst experience, recommendation category before the revision, number of categories changed in the revision) factors.

Age of Firms and the Value of Analyst Recommendation

Objective – This paper assesses the value of information disclosure in Malaysian analyst reports by examining three categories of firms, according to their age (young, medium and old). Methodology/Technique – The study uses a market-adjusted method to calculate the cumulative abnormal return and panel regression to test the research objective. The results from the unbalanced panel data reveals that not all information contained in the analyst reports is able to detect the movement in stock returns. Findings – Younger firms recorded two significant results (ROE and SPR) whereas among medium aged firms, TP, CFP, SPR, and MC all had an impact on CAR. The older firms showed that TP, EF, ROE and SPKLCI had an impact on CAR. Novelty – This qualitative inquiry reveals that Malaysian analyst reports tend to disclose information based on simple statistical analyses to formulate recommendations whilst ignoring other significant qualitative information. Type of Paper: Empirical Keywords: Age; Value; Analyst Report; Malaysia. Reference to this paper should be made as follows: Thaker, H. M. T.; M, A. 2019. Age of Firms and the Value of Analyst Recommendation, J. Bus. Econ. Review 4 (2): 90 – 96 https://doi.org/10.35609/jber.2019.4.2(3) JEL Classification: G30, G32, G39.