Do Sell-side Analyst Reports Have Investment Value?

Linying Lv

Papers from arXiv.org

Abstract: This paper documents new investment value in analyst reports. Analyst narratives embedded with large language models strongly forecast future stock returns, generating significant alpha beyond established analyst-based and fundamental-based factors. The return predictability arises primarily from reports that convey negative sentiment but forecast favorable long-term prospects, suggesting systematic market overreaction to near-term negative news. The effect is more pronounced for large, mature firms and for reports authored by skilled, experienced analysts. A Shapley value decomposition reveals that analysts' strategic outlook contributes the most to portfolio performance, especially forward-looking discussions on fundamentals. Beyond demonstrating untapped value in qualitative information, this paper illustrates the broader potential of artificial intelligence to augment, rather than replace, expert human judgment in financial markets.

Date: 2025-02, Revised 2025-03
New Economics Papers: this item is included in nep-fmk
References: Add references at CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2502.20489 Latest version (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:arx:papers:2502.20489

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().