Do local analysts have an informational advantage in forecasting stock returns? Evidence from the German DAX30

T. Hendricks (), Bernd Kempa and Christian Pierdzioch

Financial Markets and Portfolio Management, 2010, vol. 24, issue 2, 137-158

Abstract: Utilizing data from the German DAX30 stock index, we investigate whether local analysts have an informational advantage in forecasting stock returns. We analyze whether banks’ buy and sell recommendations improve on the out-of-sample predictability of daily stock returns and the market-timing ability of investors who base their decisions on such recommendations. We find that, indeed, in a few cases German banks do have better stock-forecasting ability for daily stock returns than do foreign banks. However, the value added of bank recommendations is generally small and sensitive to the model-selection criterion used by an investor in setting up a forecasting model for stock returns. Copyright Swiss Society for Financial Market Research 2010

Keywords: Forecasting stock returns; Bank stock recommendations; Local analysts; C53; E44; G11 (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1007/s11408-010-0129-7

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