How Do Analyst Recommendations on Banks Respond to Monetary Policy News? An Application to the Eurozone

Sophie Brana (), Quentin Bro de Comères () and Anne-Gaël Vaubourg ()
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Sophie Brana: BSE - Bordeaux sciences économiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Quentin Bro de Comères: LéP [Poitiers] - Laboratoire d'économie de Poitiers - UP - Université de Poitiers = University of Poitiers
Anne-Gaël Vaubourg: LéP [Poitiers] - Laboratoire d'économie de Poitiers - UP - Université de Poitiers = University of Poitiers

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Abstract: We assess the extent to which stock analysts consider European Central Bank monetary policy decisions when formulating their investment recommendations on European banks from 2002 to 2020. To identify monetary policy shocks, we extract monetary policy factors from high-frequency rate movements surrounding monetary policy announcements. Our findings indicate that stock analysts are more concerned with nonstandard (or unconventional) monetary policy measures than standard policy measures. We also demonstrate that analysts interpret restrictive (accommodative) monetary surprises as positive (negative) news for bank financial health, particularly during periods characterised by high levels of financial uncertainty. Lastly, we emphasize that the reaction of stock recommendations to rate-and forward guidancerelated decisions is primarily influenced by the implicit disclosure of information on the economic outlook by the ECB along its monetary policy decision.

Keywords: European Central Bank; Monetary Policy; Stock Analysts; Signaling Channel; Local Projections (search for similar items in EconPapers)
Date: 2024-11-08
Note: View the original document on HAL open archive server: https://hal.science/hal-04986898v1
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Published in Applied Economics, 2024, ⟨10.1080/00036846.2024.2422110⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04986898

DOI: 10.1080/00036846.2024.2422110

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