Analyst rating matters for index futures

Liyan Han, Xinbei Wei, Sen Yan and Qunzi Zhang

Journal of Futures Markets, 2022, vol. 42, issue 11, 2084-2100

Abstract: Analyst recommendations convey valuable market‐wide information which implies analyst rating should generate reliable predictability for future market returns. This paper examines the predictive regressions which forecast the S&P 500 index futures return and volatility with lagged text‐based analyst rating index (TAR index). Empirical evidence shows that the TAR index generates superior in‐sample predictability. This substantial predictability remains after controlling the business cycles, macroeconomic factors, and economic conditions. Also, the TAR index outperforms the prevailing mean out‐of‐sample and generates significant economic performance. Notably, the TAR index also delivers consistent predictive gains on the volatility of index futures returns.

Date: 2022
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https://doi.org/10.1002/fut.22341

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