Chinese Security Analysts' Predicting Ability

The predicting ability of security analysts is one of their most important abilities, the study of it has important theoretical and practical significance in guaranteeing security analysts'independency, impartiality and efficiency, preventing the manipulation of stock prices and helping the security analysts in maintaining the efficiency of the markets.First, I did an empirical research of Chinese security analysts'predicting ability. The sample data is a 72 weeks (2003.11.30 -2005.6.17) stock recommendation data from the"Chinese Stock Newspaper". The results reveal that there is an remarkable positive abnormal return of the Chinese analysts'stock recommendations before these recommendation went into public, but the abnormal return after those recommendation went into public is unremarkable or even negative. Abnormal return under bull market is higher than it under bear market. And investment bank recommendations outperform those of independent research firms.Then I analyzed the affecting factors of Chinese analysts'predicting'ability through analyzing security analysts'research papers and their regulation. Firstly, I compared the research papers of the analysts from Chinese companies to that of analysts from foreign companies. And I found out that there exist some problems such as lack of some important target data, lack of the instructions of the method use in the research papers, special instruction of the objectivity and legal responsibility of the research papers is insufficiency. A good research paper must write by an excellent analyst. So it is important to improve Chinese analysts'business quality to promote their predicting ability. Secondly, I analyzed the development of the regulation of Chinese analysts and compared it to that of American analysts. The results shows that we need a more strict regulation environment to promote Chinese analysts'predicting ability.Conclusively, there exists a lot of insufficiency in the aspects of Chinese analysts'quality and analyzing skills, analyst's autonomy organization, analysts'regulation. To improve such kind of situation we can do something through the following method: make the entrance necessity to be a security analyst stricter, establish a more strict regulation of our analysts and strengthen the profession autonomy.