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Investment Recommendations Made by Financial Analysts and Their Impact upon the Price Evolution of the Shares Listed on the Bucharest Stock Exchange

Carmen Lipara

The Valuation Journal, 2011, vol. 6, issue 2, 100-123

Abstract: The investment decisions made by investors on the capital market are based, among others, on the recommendations made by financial analysts. The extent to which investors take into consideration the investment recommendations made by the analysts differs mainly due to the degree of the capital market development, the role it plays in financial intermediation process and the informational efficiency of the market. Based on the data collected on the Bloomberg platform, we analyzed to what extent the stock exchange evolution trend (increase or decrease) overlaps the trend forecasted by the analysts. Thus, we test whether the increase/decrease estimated by the analysts matched the stock exchange evolution in the following quarter of the recommendation announcement, without highlighting the level of the recorded increase/decrease. Also, we compared the estimated potential upside/downside against the percentage change of the average price in the quarter following the recommendation announcement compared with the price recorded on the day of recommendation.

JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2011
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Handle: RePEc:vaj:journl:v:6:y:2011:i:2:p:100-123