Stock Return Dynamics after Analyst Recommendation Revisions
Andrey Kudryavtsev
Journal of Risk & Control, 2020, vol. 7, issue 1, 1-16
Abstract:
The study explores the correlation between the immediate and the longer-term stock returns following analyst recommendation revisions. In line with previous studies, documenting that recommendation revisions are followed by significant stock price drifts , I suggest that if a recommendation revision is followed by a relatively large short-term stock price drift, then it may indicate that the new information is more completely reflected by the respective stock's price, creating significantly less reasons for subsequent longer-term price drift, which therefore, should be significantly less pronounced compared to the one following another recommendation revision which is not immediately followed by a significant price drift in a short run. Employing a sample of recommendation revisions, I establish that positive (negative) one-, three- and six-month stock price drifts after recommendation upgrades (downgrades) are significantly more pronounced if the latter are immediately followed by relatively low (high) short-term (5- or 10-day) cumulative abnormal returns. The effect remains robust after accounting for additional company-specific (size, Market-Model beta, historical volatility) and event-specific (number of recommendation categories changed in the revision, analyst experience) factors.
Keywords: Analyst Recommendation Revisions; Behavioral Finance; Overreaction; Stock Price Drifts. (search for similar items in EconPapers)
JEL-codes: G11 G14 G19 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://www.riskmarket.co.uk/jrc/journals-articles ... nload=attachment.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:rmk:rmkjrc:v:7:y:2020:i:1:p:1-16
Access Statistics for this article
Journal of Risk & Control is currently edited by Stephanos T. Papadamou and Philippas Dionisis
More articles in Journal of Risk & Control from Risk Market Journals
Bibliographic data for series maintained by Eleftherios Spyromitros-Xioufis ().