Can analysts pick stocks for the long-run?

Oya Altınkılıç, Robert Hansen and Liyu Ye

Journal of Financial Economics, 2016, vol. 119, issue 2, 371-398

Abstract: This paper examines post-revision return drift, or PRD, following analysts’ revisions of their stock recommendations. PRD refers to the finding that the analysts’ recommendation changes predict future long-term returns in the same direction as the change (i.e., upgrades are followed by positive returns, and downgrades are followed by negative returns). During the high-frequency algorithmic trading period of 2003–2010, average PRD is no longer significantly different from zero. The new findings agree with improved market efficiency after declines in real trading cost inefficiencies. They are consistent with a reduced information production role for analysts in the supercomputer era.

Keywords: Analysts’ forecasts; Financial analysts; Financial markets; Investment banking; Market efficiency; Security analysts; Behavioral finance (search for similar items in EconPapers)
JEL-codes: G02 G14 G24 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:119:y:2016:i:2:p:371-398

DOI: 10.1016/j.jfineco.2015.09.004

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