ASSESSING THE VALUE OF ANALYSTS’ RECOMMENDATIONS WITH FOCUS ON INDUSTRIES WITH HIGH INTANGIBLES

Abstract

This paper provides updated evidence on the value of analyst recommendations, using consensus analyst recommendations, and based on a calendar-time, investor-oriented approach. The value of consensus analyst recommendations was measured as abnormal returns, as indicated by the intercept in regressions ran based on the CAPM and Fama-French 3-factor model. This paper documents that analyst recommendations in general exhibit stock picking and market timing skills. In addition, this study also studied the effect of intangible assets on the value of analyst recommendations, using industrial categories to proxy for the levels of intangibles. The results show that firms with higher levels of intangibles receive more frequent recommendation reviews, and recommendations for firms with higher levels of intangibles outperformed the recommendations for firms with lower levels of intangibles.