The Value Of Analysts Investment Rating In China A-Share Market

Do analysts'recommendations have investment value? In other words,whether Investors can gain abnormal profit by following analysts'public recommendations? This issue has long been debated by financial researchers and practitioners. The Academic literature in this area for developed countries is abundant and still growing However,relevant study on China is still sparse. It was not until recent three or four years that securities research has emerged in to a profession. And correspondingly, data bases for analysts'research (including both recommendations and earnings forecast) are not available until recent years. Fortunately,there has been a rapid increase in the number of analysts,their reports and their influence,as witnessed by both anecdotal evidence and straight forward statistics.I collected above10 thousand recommendations on about 1,000 companies from more than l'000 analysts,the sample range from May 2005 to April 2008,totally three financial report years. I utilize event study,multi-regression, to reach empirical evidence.This thesis examines the market reaction to analyst ratings and subsequently investigates the factors which have an impact on the market reaction in the largest, China. It provides substantial evidence that analyst ratings have investment value. The main findings are: Analyst ratings in China have significant influence on the market; Markets tend to react more strongly to ratings from large brokers than those from small brokers; The magnitude of the market reaction depends upon the size of listed company, industry and ownership structure; The market reaction to strong buy ratings is economically and statistically significant; The market behaves very differently to ratings during different market trends.