Analyst's stock views and revision actions

Tao Li

Finance Research Letters, 2022, vol. 44, issue C

Abstract: It is desirable to know analysts’ true stock views when they issue conflicting revisions in their earnings forecasts, price targets, and stock recommendations. This study employs the hidden Markov model (HMM) to model analysts’ revision activities and make inference for the “stock views”. The validity of the “stock views” is examined through the revision-view consistency. The results demonstrate that revisions consistent with stock views trigger stronger abnormal returns than revisions inconsistent with views. Analysts’ revisions are less effective when the stock views are perceived to be stagnant. Investors and researchers can use stock views to identify more informative revisions.

Keywords: Earnings forecasts revisions; Stock recommendations revisions; Price target revisions; Stock views; Hidden Markov model; Market reactions (search for similar items in EconPapers)
JEL-codes: C13 G14 G20 M41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:44:y:2022:i:c:s1544612321001148

DOI: 10.1016/j.frl.2021.102033

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