File Download
There are no files associated with this item.
Links for fulltext
(May Require Subscription)
- Publisher Website: 10.1287/mnsc.2015.2385
- Scopus: eid_2-s2.0-85020393794
- WOS: WOS:000402733100011
- Find via
Supplementary
- Citations:
- Appears in Collections:
Article: Do earnings estimates add value to sell-side analysts' investment recommendations?
Title | Do earnings estimates add value to sell-side analysts' investment recommendations? |
---|---|
Authors | |
Keywords | Asset pricing Earnings estimates Equity research analysts Growth rates Information Investment recommendations Trading strategy Valuation |
Issue Date | 2017 |
Citation | Management Science, 2017, v. 63, n. 6, p. 1855-1871 How to Cite? |
Abstract | Sell-side analysts change their stock recommendations when their valuations differ from the market's. These valuation differences can arise from either differences in earnings estimates or the nonearnings components of valuation methodologies. We find that recommendation changes motivated by earnings estimate revisions have a greater initial price reaction than the same recommendation changes without earnings estimate revisions: about +1:3% (-2:8%) greater for upgrades (downgrades). Nevertheless, the postrecommendation drift is also greater, suggesting that investors underreact to earningsbased recommendation changes. Implemented as a trading strategy, earnings-based recommendation changes earn risk-adjusted returns of 3% per month, considerably more than non-earnings-based recommendation changes. Evidence from variation in firms' information environment and analysts' regulatory environment suggests that recommendation changes with earnings estimate revisions are less affected by analysts' cognitive and incentive biases. |
Persistent Identifier | http://hdl.handle.net/10722/326125 |
ISSN | 2023 Impact Factor: 4.6 2023 SCImago Journal Rankings: 5.438 |
ISI Accession Number ID |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Kecskés, Ambrus | - |
dc.contributor.author | Michaely, Roni | - |
dc.contributor.author | Womack, Kent L. | - |
dc.date.accessioned | 2023-03-09T09:58:12Z | - |
dc.date.available | 2023-03-09T09:58:12Z | - |
dc.date.issued | 2017 | - |
dc.identifier.citation | Management Science, 2017, v. 63, n. 6, p. 1855-1871 | - |
dc.identifier.issn | 0025-1909 | - |
dc.identifier.uri | http://hdl.handle.net/10722/326125 | - |
dc.description.abstract | Sell-side analysts change their stock recommendations when their valuations differ from the market's. These valuation differences can arise from either differences in earnings estimates or the nonearnings components of valuation methodologies. We find that recommendation changes motivated by earnings estimate revisions have a greater initial price reaction than the same recommendation changes without earnings estimate revisions: about +1:3% (-2:8%) greater for upgrades (downgrades). Nevertheless, the postrecommendation drift is also greater, suggesting that investors underreact to earningsbased recommendation changes. Implemented as a trading strategy, earnings-based recommendation changes earn risk-adjusted returns of 3% per month, considerably more than non-earnings-based recommendation changes. Evidence from variation in firms' information environment and analysts' regulatory environment suggests that recommendation changes with earnings estimate revisions are less affected by analysts' cognitive and incentive biases. | - |
dc.language | eng | - |
dc.relation.ispartof | Management Science | - |
dc.subject | Asset pricing | - |
dc.subject | Earnings estimates | - |
dc.subject | Equity research analysts | - |
dc.subject | Growth rates | - |
dc.subject | Information | - |
dc.subject | Investment recommendations | - |
dc.subject | Trading strategy | - |
dc.subject | Valuation | - |
dc.title | Do earnings estimates add value to sell-side analysts' investment recommendations? | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1287/mnsc.2015.2385 | - |
dc.identifier.scopus | eid_2-s2.0-85020393794 | - |
dc.identifier.volume | 63 | - |
dc.identifier.issue | 6 | - |
dc.identifier.spage | 1855 | - |
dc.identifier.epage | 1871 | - |
dc.identifier.eissn | 1526-5501 | - |
dc.identifier.isi | WOS:000402733100011 | - |