Skip to main content
eScholarship
Open Access Publications from the University of California

Are Stars’ Opinions Worth More? The Relation Between Analyst Reputation and Recommendation Values

  • Author(s): Fang, LH
  • Yasuda, A
  • et al.

Published Web Location

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2358108
No data is associated with this publication.
Abstract

© 2013, Springer Science+Business Media New York. Using 1994–2009 data, we find that All-American (AA) analysts’ buy and sell portfolio alphas significantly exceed those of non-AAs by up to 0.6 % per month after risk-adjustments for investors with advance access to analyst recommendations. For investors without such access, top-rank AAs still earn significantly higher (by 0.3 %) monthly alphas in buy recommendations than others. AAs’ superior performance exists before (as well as after) they are elected, is not explained by market overreactions to stars, and is not significantly eroded after Reg-FD. Election to top-AA ranks predicts future performance in buy recommendations above and beyond other previously observable analyst characteristics. Institutional investors actively evaluate analysts and update the AA roster accordingly. Collectively, these results suggest that skill differences among analysts exist and AA election reflects institutional investors’ ability to evaluate and benefit from elected analysts’ superior skills. Other investors’ opportunity to profit from the stars’ opinions exists, but is limited due to their timing disadvantage.

Many UC-authored scholarly publications are freely available on this site because of the UC Academic Senate's Open Access Policy. Let us know how this access is important for you.

Item not freely available? Link broken?
Report a problem accessing this item