Independence of Intrinsic Valuations and Stock Recommendations – Experimental Evidence from Equity Research Analysts and Investors

Ran Barniv, Wei Li and Timothy Miller

Journal of Behavioral Finance, 2023, vol. 24, issue 2, 147-160

Abstract: Motivated by the mixed findings in prior archival studies, this study conducts three experiments to examine the relationships among analysts’ intrinsic valuation estimates (V), stock recommendations (REC) and stock returns. Experiment 1, built on implications from prospect theory, provides direct observations on analysts’ asymmetric use of the valuation to price (V/P) ratio in making their REC. Experiments 2 and 3 indicate differences and similarities between professional and nonprofessional investors in using analysts’ V and REC in making their investment-related judgments. Our results provide implications for both research and practice.

Date: 2023
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DOI: 10.1080/15427560.2021.1949715

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