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Title: Why don’t analysts use their earnings forecasts in generating stock recommendations
Authors: Ke Bin 
Yu, Yong
Issue Date: 1-Mar-2020
Citation: Ke Bin, Yu, Yong (2020-03-01). Why don’t analysts use their earnings forecasts in generating stock recommendations. China Accounting and Finance Review 22 (1) : 31-66. ScholarBank@NUS Repository.
Abstract: While a large body of literature has examined analysts’ earnings forecasts or stock recommendations in isolation, there is little research on the effectiveness with which analysts translate their earnings forecasts into recommendations (referred to as translational effectiveness). This study provides a comprehensive analysis of the determinants of analysts’ translational effectiveness, including the investment banking pressure considered in prior research and four new factors (i.e. insider trading, trading commissions, institutional ownership, and investor sentiment). Consistent with prior research, we find that the influence of investment banking on translational effectiveness was reduced in the period subsequent to the 2002/2003 regulatory changes. However, the effect of insider trading, institutional ownership, and investor sentiment on translational effectiveness remains as significant or becomes even stronger. In addition, the combined influence of these four new factors on translational effectiveness is equally as important as the influence of investment banking pressure.
Source Title: China Accounting and Finance Review
ISSN: 1029807X
Appears in Collections:Staff Publications

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