We study analysts’ industry recommendations. We find that the distribution of industry recommendations is quite balanced. Analysts show more optimism towards industries with high levels of R&D, past profitability and past returns. Industry recommendations possess investment value as portfolios based on these recommendations generate risk-adjusted abnormal returns. Finally, industry recommendations contain information which is orthogonal to that included in firm recommendations, and more so for brokers who benchmark their firm recommendations to industry peers. Consequently, the investment value of analysts’ recommendations is enhanced when both industry and firm recommendations are used.
Industry recommendation, Analysts, Market Efficiency, Financial analysts, Stock Recommendations, Industry Analysis
Corporate Finance | Portfolio and Security Analysis
China International Conference in Finance, Beijing, 4-7 July 2010
City or Country
Kadan, Ohad; Leonardo, Madureira; WANG, Rong; and Zach, Tzachi.
Industry Recommendations: Characteristics, Investment Value, and Relation to Firm Recommendations. (2010). China International Conference in Finance, Beijing, 4-7 July 2010. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/2958