What drives sell-side recommendation announcement returns?
DOI:
https://doi.org/10.61190/fsr.v15i4.4867Keywords:
Behavioral finance, Analysts’ recommendationsAbstract
Before an individual investor follows a professional stock analyst’s investment recommendation, the Securities and Exchange Commission (2005) urges the investor to consider carefully the potential conflicts of interest facing the analyst. Our study examines this issue in the context of Griffin and Tversky’s (1992) model that explores how individuals weigh evidence and form beliefs. We find that although investors focus primarily on recommendation strength following upgrades, investors con- sider both recommendation strength and credence following downgrades. However, we find no evidence that stock price performance is affected by any underwriting relationship between the firm employing the analyst and the firm being recommended.
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