The Impact of the Change of Investment Banks'' Recommendations on Stock Return
Date Issued
2014
Date
2014
Author(s)
Pai, Yung-Chieh
Abstract
This study focuses on the impact of the change of recommendations that announced by sell-side brokerage houses. We observed that there is a great difference between the amount of positive recommendations and negative ones and started examining the impact of upgrade and downgrade of these investment recommendations. In order to track the influence of this information, we employed Event Study which is most commonly used in finding out the impact of specific event on stock price in each category.
Some scholars argued that foreign investment banks’ recommendations are more trust-worthy. However, the others didn’t agree with this argument. To extend this contention, we separated our data into two categories: foreign and local. Each recommendation was put into only one of these groups by considering the nationality of the investment bank who announced this report. After categorizing, we repeated the process mentioned above again.
Finally, we found out that those downgrade recommendations could generate significantly negative both abnormal return and cumulative abnormal return. Furthermore, foreign investment banks’ recommendations discover these two kinds of return before those announced by local competitors. To sum up, this study’s major contribution is that investors could adjust their portfolio based on the recommendation changes so that they could earn benefits from stock market.
Subjects
事件研究法
市場指數調整法
投資建議
異常報酬
Type
thesis
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