Salient anchor and analyst recommendation downgrade

Fengfei Li, Chen Lin and Tse-Chun Lin

Journal of Corporate Finance, 2021, vol. 69, issue C

Abstract: We find that analysts are more likely to downgrade stocks when prices approach the 52-week high. The results are stronger for stocks with higher information asymmetry but moderated by analysts' reputation, work experience, and educational background. We also find a strategy that shorts stocks with recommendation downgrades is less profitable for the downgrades near 52-week high than for other downgrades. Moreover, these downgraded firms with prices near 52-week high subsequently experience relatively less negative earnings forecast revisions. These results suggest that these downgrade decisions are less likely to be information-driven and consistent with our anchoring interpretation.

Keywords: Salient anchor; 52-week high; Analyst recommendation changes; Limited attention; Trading strategy (search for similar items in EconPapers)
JEL-codes: D82 G14 G24 M41 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:69:y:2021:i:c:s0929119921001553

DOI: 10.1016/j.jcorpfin.2021.102033

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