Do Brokerage Analysts' Recommendations Have Investment Value?
Abstract
An analysis of new buy and sell recommendations of stocks by security analysts at major U.S. brokerage firms shows significant, systematic discrepancies between prerecommendation prices and eventual values. The initial return at the time of the recommendations is large, even though few recommendations coincide with new public news or provide previously unavailable facts. However, these initial price reactions are incomplete. For buy recommendations, the mean postevent drift is modest (+2.4%) and short‐lived, but for sell recommendations, the drift is larger (−9.1%) and extends for six months. Analysts appear to have market timing and stock picking abilities.
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Cites
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Each is checked against this paper’s own text: does it say what the citing paper says it does?
Recommendations of brokerage-house analysts have investment value.
“Barber et al. (1998) and Womack (1996) present evidence that the recommendations of brokerage-house analysts have investment value.”
From Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors (2000) · cites this paper as Womack (1996)
Cites
Common risk factors in the returns on stocks and bonds
Fama, E. F., & French, K. R. (1993) · Journal of Financial Economics · doi:10.1016/0304-405x(93)90023-5 · Cited by 25,754 · see citing works
FAMA, E. F. (1991) · The Journal of Finance · doi:10.1111/j.1540-6261.1991.tb04636.x · Cited by 5,350 · see citing works
Flagged first, then by citations
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Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors
Barber, B. M., & Odean, T. (2000) · The Journal of Finance · doi:10.1111/0022-1082.00226 · Cited by 3,955 · see citing works
… and the Cross-Section of Expected Returns
Harvey, C. R., Liu, Y., & Zhu, H. (2016) · Review of Financial Studies · doi:10.1093/rfs/hhv059 · Cited by 2,119 · see citing works
Wisdom of Crowds: The Value of Stock Opinions Transmitted Through Social Media
Chen, H., De, P., Hu, Y. (., & Hwang, B.-H. (2014) · Review of Financial Studies · doi:10.1093/rfs/hhu001 · Cited by 1,251 · see citing works
Gerritsen, D. F. (2016) · International Review of Financial Analysis · doi:10.1016/j.irfa.2016.06.008 · Cited by 32 · see citing works
- Authors
- WOMACK, K. L.
- Affiliations
- Dartmouth College (US)
- Corresponding author
- WOMACK, KENT L.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1996-03
- Volume
- 51
- Issue
- 1
- Pages
- 137-167
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2104697841
- Cited by
- 1,931
- References
- 2
- Citations by year
- 2026: 40 · 2025: 50 · 2024: 58 · 2023: 82 · 2022: 67 · 2021: 63 · 2020: 86 · 2019: 70 · 2018: 73 · 2017: 77 · 2016: 89 · 2015: 88 · 2014: 94 · 2013: 98 · 2012: 95
- FWCI
- 42.38
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The Journal of Finance (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Financial Markets and Investment Strategies
- Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
- Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
- Keywords
- investment advice, buy and sell recommendations, market timing, stock selection, stock returns
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Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.
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