| Since the Shanghai Stock Exchange and Shenzhen Stock Exchange formally opened in December1990and June1991, the security market in China has officially entered the track of development. And with the development of China’s securities markets, there are more and more of the listed companies and people gradually deepened knowledge of and participant in this market. However, in the face of increasingly complexity, individual investors is difficult to conduct a comprehensive analysis of securities investment. As a result, securities analysts are placed great expectations as an information broker.Securities analysts play an important role in the capital markets. As security market intermediaries, linking listed companies with investors, they analyze the potential economic and investment value through detailed investigation for listed companies, and provide investment advice to investors. In this way, they play a very crucial role to reduce the information asymmetry. Through comprehensive understanding and analysis of listed companies, they make the appropriate investment rating, such as "buy","neutral" and "sell". Then according to the analysts recommended stocks, the investors take investment operations. Will it give investors excess returns? What are the characteristics of the listed company’s securities analysts during rating? Is a mining company’s long-term investment value or a market’s short-term hot spot? Is their recommendation effective? Based on above questions, I took the rating behavior of securities as research subjects, the stock recommendation rating data as a research measure indicator, and had a research of stock recommendation on different market trends—bull and bear market to see whether they have a significantly different impact on the market. This paper used the event study methodology and tried to find out the differences and similarities of the Securities analyst stock recommendation stock behavior under the different market trends. The existence of the differences indicates that the market trend has an impact on the behavior of analysts; the existence of the similarities indicates that securities analysts have some standards and preferences. Through these studies, investors can get a better use of securities analysts, investment reports, and information to get higher returns.The content and structure of this paper is as following:Part One:IntroductionIt introduces the background, subject and meaning of this paper. It is in the context of the stock market step by step developing, the Securities Investor gradually increasing, and the investors in the face of a large number of increasingly complex trading products. Whether the information given by the security analysis is reliable or not will affect the investors significantly draw the research on the behavior of the security analysis. Then it introduced innovation and shortcomings in this paper. The innovation is the comparison of different market trends, and at the same time, it used the whole database in a long time period. The main shortcomings are that it doesn’t take the trading commissions into account, and the processing of data is not detailed enough.Part Two:Overview of the Securities Analyst IndustryFirst, it introduces the definition and classification of securities analysts. According to the property of the agency and the different interest groups, the analyst is divided into the buyer analysts, sell-side analysts and independent analysts. While the paper studied the seller of securities analysts, who is employed by a securities company to provide investment advice to public investors. Second, it describes the history of the analyst industry. The securities analyst appeared with the development of Chinese capital market. In the beginning, usually the security commentators gave some investment advices. However, there were some illegal problems. With the development of the regulations and standard in this industry, the requirements and the recognition of the analyst gradually improved. Third, it describes the functions of the securities analyst, which is to collect all kinds of information, to analyze and process, and finally provide investment advice to investors.Part Three:Literature ReviewThrough the study of foreign and domestic literature, I summarized the different effectiveness of recommended securities analysts. Also I chose to do this research based on the level of the individual public investors and the event study methodology.Part Four:the Theoretical Basis of this studyIt includes the efficient market theory and information economics.Part Five:Empirical StudyIt is the most important part in this paper. This part is divided into three sections. First, all the data I used is the recommendation of A-class stock divided into-buy, sell, and neutral—three types and—bull and bear—two markets trends. The stock price in research is present value of the stock price. The second section describes the steps using the event study, research events, selecting the event window and so on. After the data processing, I calculated the normal rate of return by market model, and used the stata software programming to obtain the average cumulative excess return of each time window. In the end, I analyzed different reference values of the security recommendations in different market trends. In a bull market, buy rating with a high reference value; sell rating has high reference value in a bear market; in the consolidation market, sell rating has a relatively high reference value. Then I conducted the similarities and differences in the different market trends.Part Six:Conclusions and RecommendationsIn this paper, the analysis of the empirical results obtained the recommending behavior of securities analysts has some characteristics. First, the accuracy of the securities analysts’ratings will be the impact of the market. Second, securities analysts widely have an optimistic attitude, and tend to recommend a buy rating. Third, a neutral rating given by securities analysts recommended the stock and some can be used as one of the sell portfolio choice, because the release of neutral rating trend is similar with sell ratings, and sometimes even a real decrease is larger than sell rating said. Fourth, securities analysts giving different rating will consider the trend of the stock before rating. Namely, the Chinese securities analyst is information-driven, prefers to concerned about the hot market and the star shares. Fifth, through a comparative analysis of the data obtained by three different rating given by the securities analyst, I found in different form of securities market, the reference value of the sell rating is relatively large.Based on the analysis results of this study, the effect of the securities analysts’ investment recommendations will be different because of different market conditions. But in general, sell recommendations has the best reference value to avoid certain risks. The investors need combine the investment report with the overall macroeconomic analysis to do their own investment. In short, investors can reasonable analyze the recommend stocks and take full advantage of the information collected by the security analysis, to obtain excess returns. |
PDF Full Text Request