Investors' Greed and Fear: An Event Study of Analyst Recommendations

Qingxia (Jenny) Wang

A chapter in Financial Crises - Challenges and Solutions from IntechOpen

Abstract: We investigate the effect of the skewness developed by the CBOE, called SKEW, on investors' reactions to analyst recommendations. Our results show that the abnormal stock returns around analyst recommendation revisions are closely correlated with contemporaneous SKEW changes. Specifically, positive (negative) abnormal returns following analyst recommendation upgrades (downgrades) are stronger when daily SKEW increases (decreases). A potential explanation for this relation is that SKEW captures investors' greed (excitement) in the stock market. Similar to the CBOE VIX, SKEW might act as another measure to reflect investors' moods or sentiments. However, in contrast to VIX, which is usually used as investors' fear gauge, SKEW is the opposite of investors' fear, measuring investors' consensus view of future positive news. Furthermore, we show that the magnitudes of abnormal returns associated with the change in SKEW are larger for the NASDAQ than for the NYSE on recommendation announcement days. This may manifest the different types of firms listed on these two stock exchanges.

Keywords: analyst recommendation revision; abnormal return; investors' greed; investors' fear; SKEW; VIX (search for similar items in EconPapers)
JEL-codes: Z13 (search for similar items in EconPapers)
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.intechopen.com/chapters/83823 (text/html)

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:ito:pchaps:283061

DOI: 10.5772/intechopen.107187

Access Statistics for this chapter

More chapters in Chapters from IntechOpen
Bibliographic data for series maintained by Slobodan Momcilovic ().