Differentiation Study On Predictive Value Of Stock Analysts' Recommendation

Stock analysts publish different stock' recommendation based on their specialized knowledge to assist investors in making investment decisions. Based on foreign mature stock markets, scholars point out that stock analysts'recommendations have abundant value for investors. These studies take the whole data of stock analysts as an object. However, few scholars study the predictive ability that positive and negative recommendation has on enterprises based on different economics states, because different economic environment stock market situates on could result in different predictive value stock recommendations have on enterprises. And fewer scholars explore the predictive value of analysts'recommendation in immature stock markets such as China.So this paper studies predictive value that positive and negative stock recommendations have on leading and non-leading enterprises in different industries based on bull and bear market. This paper firstly reviews literatures related to information economics and then calculates abnormal return rates through event study. There are two key researches. Firstly, study the predictive value of analysts' stock recommendation to leading and non-leading stocks in bull and bear market. The paper shows that this predictive value has differences in leading and non-leading stocks in bull and bear market. Specially, positive recommendation in bear market has higher predictive value than in bear market, and negative recommendation has high value in both bull and bear market. Also, during bear market, positive recommendation of analyst has high value to both leading and non-leading stocks, and positive recommendation has higher predictive value to leading stocks than to non-leading stocks in bull market.Secondly, study the predictive value of stock recommendation to leading and non-leading stocks in different industries between bull and bear market. It shows that the differences of predictive values to leading and non-leading stocks exist in different industries and different market environment. The predictive value to daily consumption industry and medical care industry has higher value than to other industries, and this may be related to disclosure of information. In other industries, the predictive values of stocks' recommendation of analysts to leading and non-leading stocks have differences in bull and bear market.This paper enriches studies about stock recommendations, and at the same time, investors could realize that positive and negative stock recommendations that analysts give have diverse values on stock abnormal returns rates coming from leading and non-leading enterprises. It is wisdom for investors to make investment decisions based on specific economic environment.