The information content of analyst recommendations after large changes in stock price

• Main Authors: Wu, Yue-Heng, 吳岳衡
• Other Authors: Po-Hsin Ho
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/30431419692892680337

碩士 === 國立臺北大學 === 企業管理學系 === 103 === This study follows Savor (2012) to investigate the information implications of analyst recommendations during the large price changes. Using a sample of stock listed on Taiwan Stock Exchange from 1993 to 2013. We find that, on average, stock returns have short-term momentum phenomenon in Taiwan. This momentum phenomenon is correlated with analyst's recommendation. During the large price changes, comparing stocks with analyst recommendations, stocks without analyst recommendations exhibit stronger momentum effect, supporting the view that analyst recommendation provides investors more information to avoid the behavior of under reaction. This result is robust after controlling the liquidity factors, earnings announcements, cash dividend. In addition, we also compute the calendar-time abnormal returns to examine the profitability of this effect. The result supports our previous work. Then we further investigate the relation between the direction of analyst recommendation and the direction of stock price changes during the event day. The results show that when the two directions are the same, the stock price exhibit momentum phenomenon. However, if the directions are opposite, the reversal effect will happen. Finally, we divide the analyst recommendation according to the investment bank where the analysts work for as "domestic" and "foreign" and examine whether the information contain is different or not. We find the effect is asymmetry. When the direction of analyst recommendation and the direction of stock price changes during the event day is the same, the stock reaction from the recommendation proposed by the domestic brokerage exhibit strong momentum and foreign brokerages has no effect; when the directions are opposite, the stock reaction from the recommendation proposed by the foreign brokers experience strong reversal effect. The above results suggest that when the two directions are the same, the recommendation from local brokerage firms make investors not to trade immediately and lead to the subsequent momentum effect, but not for the recommendation from foreign brokerage firms; when the directions are opposite, investors may overreaction for the information provided by the foreign brokerage firms.