Analysts’ Rating,Stock Recommendation Convergence And Stock Return

As professional researchers, securities analysts play an increasingly important role in the capital market. They join the investors and listed companies, analyze the potential investment value of listed companies for investors, and issue research reports for investors to read. China’s stock market participants are retail-based. With the development of the Internet, securities analysts’ research reports is easier to obtain, and professional securities analysts’ rating comments have greater influence.Investment value securities analysts’ research reports one of the core questions in literature. We found that the number of reports are increasing with the expanding of current research institutions, but because of the mixed research team, stock recommendation convergence also produces. In this paper, take in-depth research reports for example, we will link the investment value of the report to information content, and attempt to explore the impact of investment grade issued by the research report on stock market; On this basis, this paper will examine stock recommendation convergence behavior, and the impact of this recommendations convergence on stock market and its internal mechanism.In this paper, we use multiple linear regression method to do empirical analysis about investment value of rating, using in-depth research report data since 2014. Research has shown that the higher investment rating of in-depth research reports, the greater market response, but only in the short or middle term. We can conclude that the investment rating of in-depth research reports can effectively transfer to the investment value in a certain period of time. Therefore, investment rating and comments of reports have some referential value. Meanwhile, we find that the asymmetry rating adjustment almost has no influence.This paper defined the stock recommendation convergence behavior. The study has found that if calculation in the first recommended point, that stocks with recommendation convergence have a higher investment value compared to other individual stocks. On the convergence of the recommended sample report for overall research, we find subsequent recommendation after second stock recommendation does not bring the cumulative excess returns, illustrating that the market reaction is mainly in the first and second times of recommendation, In the same period of the stock recommendation, we use stocks’linkage to market as the measure of heterogeneous information content, and find that the information content of the report suffer a regression in chronological order. Further, this paper defines the herding behavior. Combined with the existing results, this paper has shown that stock recommendation convergence behavior belongs to herd behavior which is consistent with the market ignoring their own information.From the point view of information content, the paper argues that stocks with recommendation convergence have a higher investment value compared to other individual stocks if calculation in the first recommended point because of its higher information content. To this end, this paper constructs the path of recommendation convergence influence stock price, then introduces interaction term of convergence index and investment rating level to the model, and find investment rating of convergence recommended stocks has a greater impact on stock returns. We argue that stocks which are convergence recommended modify market expectations by investment rating, and influence market by transfer of emotion. However, as for investment opportunities, the result shows that this convergence behind imply a waste of research resources, and investors must not believe that this is consistent with market expectations to blindly invest...