Influential analyst recommendations : are they the hidden gem?

• Autor(a) principal: Mascarenhas, Pedro Miguel Nussbaumer
• Data de Publicação: 2013
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/17591
• topic: Domínio/Área Científica::Ciências Sociais::Economia e Gestão

Informational signals play an important role in Finance. We analyze influential recommendations changes in the US between 1993 and 2012 which accounts for 19% of the overall. We find that they depend on the magnitude of the recommendation change, concurrent earnings, and higher firm institutional ownership. Using this to predict influential recommendation in an out of sample exercise, we construct a long-short portfolio that buys positive and sells negative influential recommendation changes. We find that this strategy yields a net annualized abnormal return of 26%, an annualized Sharpe ratio of 1.23, and an annualized certainty-equivalent of 27% between 1999 and 2012, which compares well to an annualized Sharpe Ratio of 0.40 and an annualized certainty-equivalent of 6% of the CRSP equally-weighted index.