On the Investment Value of Sell-Side Analyst Recommendation Revisions in the UK.



Su, C, Zhang, Hanxiong, Bangassa, K ORCID: 0000-0001-7588-737X and Lael Joseph, Nathan
(2019) On the Investment Value of Sell-Side Analyst Recommendation Revisions in the UK. Review of Quantitative Finance and Accounting, 53. 257 - 293.

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ANALYST RECOMMENDATION PUBLISHED ONLINE 10.1007_s11156-018-0749-y.pdf - Accepted Version

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Abstract

This study conducts a comprehensive investigation into the investment value of sell-side analyst recommendation revisions in the UK, using a unique dataset from 1995 to 2013. Our rolling window analysis shows that, on average, upgrades fail to generate any significantly positive abnormal returns in any period of time, even before transaction costs. In addition, although downgrades could generate significantly negative abnormal gross returns over some periods of time, these observed significant returns disappear after accounting for transaction costs. Overall, our bootstrapping simulations confirm sell-side analysts’ lack of skill in making valuable up/downward revisions to cover the size of transaction costs, irrespective of whether these revisions are made by high-ranking brokerage houses or not. However, an industry-based analysis shows that, within two high-tech industry sectors, i.e., Health Care and Technology sectors, sell-side analysts possess certain skill in making valuable downgrades over some periods of time and, in particular, such skill is sufficient to offset transaction costs.

Item Type: Article
Uncontrolled Keywords: Analyst recommendation revisions, Transaction costs, High-ranking brokerage houses, Industry, Bootstrapping simulations
Depositing User: Symplectic Admin
Date Deposited: 13 Aug 2018 06:06
Last Modified: 02 Sep 2022 07:16
DOI: 10.1007/s11156-018-0749-y
Related URLs:
URI: https://livrepository.liverpool.ac.uk/id/eprint/3024932