The trend is an analyst's friend: Analyst recommendations and market technicals

Ryan Flugum

The Financial Review, 2021, vol. 56, issue 2, 301-330

Abstract: In this paper, I assess the empirical relation between analyst recommendation decisions and market technicals. Research shows market technicals have predictive content that leads to abnormal returns. Recent survey evidence, however, shows analysts' rank technical signals as having relatively little usefulness in forming their recommendations, leading them to underweight the information content of technical signals. I find lagged positive stock price trends are associated with a greater likelihood of consensus recommendation upgrade. Furthermore, I show market technicals enhance the investment value of consensus recommendations. Overall, I demonstrate that market technicals are an important complement to analyst recommendations.

Date: 2021
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