The reaction of investors to analyst recommendations of stocks listed on the WIG20 index
Treść / Zawartość
Analyst recommendations are one of the types of information whose appearance on the market can have an influence on security prices. In this paper, I study the impact of analyst recommendations on stocks listed on the WIG20 Index, using event-study methodology and linear regression models. The dataset contains 576 absolute recommendations published from the 1st of January 2012 to the 1st of September 2015 by various analyst houses. The prefatory study researches price reaction to positive, neutral, and negative recommendations separately. Subsequently, to check if investor reaction depends on a change in the level of recommendation, corresponding research is repeated for events clustered in nine groups defined in terms of possible level changes. Linear regression models with categorical variables are used in search of additional factors affecting investor reactions. Changes in the level of recommendation, size of the company, and reputation of brokerage house represent explanatory variables. Preliminary results point out that the direction of investor reaction is generally consistent with the information contained in the recommendation, and that the reaction of the market seems to be stronger in the case of positive events than in the case of negative ones. The analysis of recommendation changes reflects more-detailed dependents. In particular, the interpretation of a neutral recommendation depends strongly on the level of the previous recommendation. If it represents growth from SELL or REDUCE, the reaction is positive, while in the case of a drop from ACCUMULATE or BUY, it leads to negative abnormal returns. This relationship is additionally confirmed by results from the linear regression models. The models show the size of the firm as a significant factor that has an influence on the reaction to a recommendation: the smaller the firm, the stronger the reaction.
Bibliogr. 25 poz., tab., wykr.
-  Barber, B.M., Lehavy, R., McNichols, M. and Trueman, B. (2001) ‘Can investors profit from the prophets? Security analyst recommendations and stock returns’, The Journal of Finance, vol. 56, pp. 531–563.
-  Barber, B.M., Lehavy, R., McNichols, M. and Trueman, B. (2005) ‘Buys, holds, and sells: The distribution of investment banks’ stock ratings and the implications for the profitability of analysts’ recommendations’, Journal of Accounting and Economics, vol. 41, pp. 87–117.
-  Brown, S.J., Warner, J.B. (1980) ‘Measuring security price performance’, Journal of Financial Economics, vol. 8, pp. 205–258.
-  Busse, J.A. and Green, T.C. (2002) ‘Market efficiency in real time’, Journal of Financial Economics, vol. 65, pp. 415–437.
-  Buzała, P. (2012) ‘Reakcja inwestorów na rekomendacje giełdowe. Implikacje dla efektywności rynku akcji’, Zeszyty Naukowe Uniwersytetu Szczecińskiego nr 698, Finanse, Rynki Finansowe, Ubezpieczenia, no. 50, pp. 11–20.
-  Corrado, C.J. (2011) ‘Event studies: A methodology review’, Accounting and Finance, vol. 51, pp. 207–234.
-  Corrado, C.J. and Zivney, T.L. (1992) ‘The specification and power of the sign test in event study hypothesis tests using daily stock returns’, Journal of Financial and Quantitative Analysis, vol. 27(3), pp. 465–478.
-  Elton, E.J., Gruber, M.J. and Grossman, S. (1986) ‘Discrete expectational data and portfolio performance’, The Journal of Finance, vol. 41, no. 3, pp. 699–713.
-  Glezakos, M. (2007) ‘Revised Analysts’ Recommendations: Are they More Valuable to Investors?’, European Journal of Economics, Finance and Administrative Sciences, issue 7, pp. 60–70.
-  Green, T.C. (2006) ‘The value of client access to analyst recommendations’, Journal of Financial and Quantitative Analysis, vol. 41, pp. 1–24.
-  Gurgul, H. (2006) ‘Zawartość informacyjna opinii analityków’, in Analiza zdarzeń na rynkach akcji, Kraków: Oficyna Ekonomiczna.
-  Gurgul, H. and Majdosz, P. (2004) ‘The information content of analysts’ recommendations: The empirical evidence from the Warsaw Stock Exchange’, Statistics in Transition, vol. 6, pp. 1151–1163.
-  Jegadeesh, M. and Kim, W. (2006) ‘Value of analyst recommendations: International evidence’, Journal of Financial Markets, vol. 9, pp. 274–309.
-  Jegadeesh, M. and Kim, W. (2010) ‘Do analysts herd? An analysis of recommendations and market reactions’, Review of Financial Studies, vol. 23, pp. 901–937.
-  Jegadeesh, M., Kim, J., Krische, S.D., Lee and C.M.C. (2004) ‘Analyzing the analysts: When do recommendations add value?’, The Journal of Finance, vol. 59, pp. 1083–1124.
-  Kim, S.T., Lin, J.-C. and Slovin, M.B. (1997) ‘Market Structure, Informed Trading and Analyst’s Recommendations’, The Journal of Financial and Quantitative Analysis, vol. 32, pp. 507–524.
-  Lin, H. and McNichols, M. (1998) ‘Underwritting relationship, analysts, earnings forecasts and investment recommendations’, Journal of Accounting and Economics, vol. 25, pp. 101–127.
-  Loh, R.K. and Stulz, R.M. (2009) ‘When are analyst recommendation changes influential?’, The National Bureau of Economic Research Working Paper, [Online], Available: http://www.nber.org/papers/w14971, no. 14971.
-  Mielcarz, P. Podgórski, B. and Weremczuk, P. (2007) ‘Positive recommendations and abnormal return on the Warsaw Stock Exchange in 2005–2006’, in Urbańczyk E. (ed.) The Problems of Company Value Management, Szczecin: Wydawnictwo Naukowe Uniwersytetu Szczecińskiego.
-  Murg, M. and Zeitlberger, A. (2014) ‘Impact of analyst recommendations on Austrian and German stocks: Information leaks, overreaction, and the influence of firm size’, Journal of Banking and Financial Research, vol. 62(11), pp. 826–837.
-  Murg, M., Pachler, M. and Zeitlberger, A. (2014) ‘The impact of analyst recommendations on stock prices in Austria (2000–2014): evidence from a small and thinly traded market’, Central European Journal of Operations Research, pp. 1–22, DOI 10.1007/s10100-014-0360-9.
-  Podgórski, B. and Mielcarz, P. (2008) ‘Wpływ negatywnych i neutralnych rekomendacji na osiąganie ponadprzeciętnych stóp zwrotu na GPW w latach 2005–2006’, Studia i Prace Wydziału Nauk Ekonomicznych i Zarządzania Uniwersytetu Szczecińskiego, no. 7, pp. 533–543.
-  Stickel, S.E. (1995) ‘The anatomy of the performance of buy and sell recommendations’, Financial Analysts Journal, vol. 55, issue 5, pp. 25–39.
-  Womack, K.L. (1996) ‘Do brokerage analysts’ recommendations have investment value?’, The Journal of Finance, vol. 51, no. 1, pp. 137–167.
-  Yazici, B. Muradoglu, G. (2002) ‘Dissemination of stock recommendations and small investors: who benefits?’, Multinational Finance Journal, vol. 6, no. 1, pp. 29–42.