Informative Value of Equity Analyst Recommendations in India

This research paper examined the informative value of equity analyst recommendations in the Indian stock market. The informative value was analysed by assessing the significance of abnormal stock returns, subsequent to the release of analyst recommendations. The results showed that analyst recommendations resulted in statistically significant stock price impact, which sustains over a period of at least six months, after the recommendations. Hence analyst recommendations are informative and contribute towards making the stock market more efficient by bringing new information. However, the stock price impact was asymmetric, being greater in the case of sell recommendations, which indicated that at least the informed investors were aware of the optimism bias in the distribution of analyst recommendations.