Analyst recommendations and mispricing across the globe

Vitor Azevedo and Sebastian Müller

Journal of Banking & Finance, 2024, vol. 169, issue C

Abstract: We examine the value of analysts’ recommendations using a dataset of 45 countries, 3.8 million firm-month observations, and 222 return anomalies from 1994 to 2019. Unlike U.S.-based evidence, recommendations lead to subsequent highly significant abnormal returns in international markets. Furthermore, analysts do not seem to strengthen mispricing in international markets, as they give more favorable recommendations to (anomaly-ranked) underpriced stocks, and inconsistencies between recommendations and composite anomaly ranks lead to lower, not higher, abnormal returns. Recommendations are more valuable in less developed and less individualistic markets. Our results suggest that analysts’ recommendations provide more value to investors than previously thought.

Keywords: Analysts; Analysts’ recommendations; Anomalies; International stock markets; Market efficiency (search for similar items in EconPapers)
JEL-codes: G12 G29 M41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:169:y:2024:i:c:s0378426624002103

DOI: 10.1016/j.jbankfin.2024.107296

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