The Impact of Foreign Reports on the Investment Profits and Losses

• Main Authors: Jin-Yuan Liu, 呂金鴛
• Other Authors: Chin-Shen Lee
• Format: Others
• Language: zh-TW
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/05971396109235273962

碩士 === 銘傳大學 === 財務金融學系碩士班 === 100 === In Taiwan stock market, the foreign brokerage firms are the intermediacies that bridge foreign institutional investors and the local stock market in many ways. One crucial function is that the analysts hired by the foreign brokerage provide analysis and recommendation on local stocks. Many local investors also refer to the foreign analyst reports while making trading decisions. However, the investment returns are not entirely consistent with the stock recommendation of foreign analysts. This raise questions about the real value of the foreign analyst reports. This paper investigates the impact of foreign analyst rating, changes in rating and target price forecast on the stock market. We also examines whether following the recommendation of foreign analyst leads to above normal profit. The empirical results are as follows. First, the event study shows that the foreign analyst rating, changes in rating and target price forecast on the stock market have cumulative abnormal return. In the short-term, the stock recommendations have investment value to investors. Second, using potential profit and downside risk as a method of assessing the actual returns, one should buy stocks with rating upgraded or target price raised and short stocks with categorized as buy, rating downgraded and target price adjusted downward or unchanged. Finally, the forecast target prices published by foreign brokers are more useful than their ratings and the changes in rating.