Analyst Stock Ratings and Future Returns
January 25, 2013 - Investing Expertise
Do analyst stock ratings usefully predict associated returns? In his November 2012 paper entitled “Are Stock Recommendations Useful”, Ireneus Stanislawek examines the relationship between stock ratings offered by sell-side analysts around the globe over the past decade and future stock returns. He defines an overall analyst rating ratio for a stock as the number of positive ratings minus the number of negative ratings, divided by the total number of ratings. He also considers the monthly change in this ratio for a stock, employing a lag to exclude the immediate impact of a rating change on stock price. Using monthly stock ratings and returns for MSCI World Index stocks (an average of 23,000 ratings per month) from the end of 2001 through mid-2012, he finds that: Keep Reading