Analysts' Recommendations: Evidence of a Portuguese Investment Bank

Essay specific features

 

Issue:

Business

 

Written by:

John M

 

Date added:

January 31, 2015

 

Level:

University

 

Grade:

A

 

No of pages / words:

25 / 6785

 

Was viewed:

8932 times

 

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Essay content:

Yet, some authors claim that evidence of analysts' forecasting ability in itself should not be interpreted as a violation of market efficiency if one cannot implement that strategy effectively. In other words, finding that research analysts play an important role in disseminating information may be consistent with market efficiency; only evidence of effective trading strategies on the basis of public information, such as research reports or analysts' recommendations, should be accepted as contradictory evidence...
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Recent research (see Wermers, 2000, as an example) suggests that the performance of active management is not superior to a passive strategy due to trading costs. Our research can thus also inform on the value created in active management done on the basis of stock picking skills. On the other hand, in the last few years, there is growing suspicion on the information value of analysts' recommendations (particularly for sell side-analysts) motivated by anecdotal evidence on lack of independence of research departments due to pressures by other investment bank departments such as brokerage or M&A (Mergers & Acquisitions)...
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