Research On Rationality Of Chinese Securities Analysts

In recent years,with the acceleration of reform and opening up and the modernization of the motherland,China's capital market has developed rapidly,both the volume of China's capital market and its degree of internationalization have been greatly improved.At the same time,with the development and evolution of China's capital market,the role of securities analysts as a link between listed companies and investors in disseminating information in the securities market has become increasingly prominent.Participants in the securities market often take their analysis and forecast reports as their important investment basis.It is worth noting that in the process of rapid development of China's capital market,the securities analysis industry has exposed many problems.In China's securities analysis industry,there are some phenomena,such as generally optimistic stock recommendation ratings,deviations between securities analysts' prediction and reality,and "black mouth" in the stock market.Therefore,how rational the securities analysts in our country are,whether the recommendation rating and earnings forecast issued in the research report will be affected by some irrational factors,and whether they really have reference value,these are worthy of our in-depth discussion.This paper chooses the recommendation ratings and earnings forecast data of A shares in Shanghai and Shenzhen Stock Exchanges from October 1,2008 to December 31,2016 as samples to explore the rationality of China's securities analysts.Based on the existing theories,this paper divides the rationality of securities analysts and elaborates the theories related to the decision-making process of securities analysts,in order to find the theoretical root for the behavioral motivation behind securities analysts.Based on the existing theory and previous literature,the author puts forward seven research hypotheses to solve three problems: first,how rational the securities analysts in China are,whether they are rational,bounded or irrational.Secondly,whether there is a difference in rationality among Chinese securities analysts when they give stock recommendation ratings and earnings forecasts respectively.Thirdly,the rationality of securities analysts in China is different because of the different listed companies.In order to solve the above problems,this paper constructs two multiple regression models,which are from the two levels of stock analysts' recommendation rating and earnings forecast,and carries on the regression analysis,trying to explore the rationality and rationality of stock analysts' recommendation rating and earnings forecast in China.In order to further explore whether the rationality of securities analysts in China is different among different listing sectors,this paper divides the samples into groups,and then makes a regression analysis and draws corresponding conclusions.Finally,the robustness test is carried out to ensure the robustness of the model.The empirical results show that the level of stock valuation has a significant positive impact on recommendation rating and earnings prediction,but it has a more significant impact on earnings prediction;the basic factors represented by institutional position ratio have a significant positive impact on earnings prediction,but not on recommendation rating;and investor sentiment has a significant impact onrecommendation rating and earnings.The predictions have significant effects,but in particular,there are differences between the two.The conclusions of this paper are as follows: Firstly,China's securities analysts are still actors of limited rationality.When they give stock recommendation ratings and earnings forecasts,they do not rely entirely on rational factors,but also are affected by investor sentiment.Secondly,the rationality of Chinese securities analysts differs significantly when they give stock recommendation ratings and earnings forecasts respectively.When making earnings forecasts,Chinese securities analysts will take more account of the company's fundamentals and industry development prospects,showing more rationality.Thirdly,there are obvious differences between the main board and the non-main board in the level of stock recommendation rating,but there is no obvious difference between the board and the earnings forecast level.The innovations of this paper are as follows: Firstly,this paper positioned the rationality of securities analysts in China.Secondly,this paper finds that there are differences in motivation behind the recommendation rating and earnings forecast of securities analysts in China,which leads to differences in rationality between the recommendation rating and earnings forecast.In the past literature,when investigating the rationality of securities analysts,they only demonstrated and analyzed at a certain level.They usually think that there is no difference or obvious difference between the two indicators.Thirdly,this paper has made some improvements and innovations in selecting agent variables representing investor sentiment.In addition,the content of this paper is conducive to help our securities analysts fully understand their own limitations,but also help our investors deepen their understanding of the securities analysts' research reports.This is of great significance for improving the effectiveness of stock pricing mechanism in China's stock market,reducing irrational behavior in the market,and improving the efficiency of resource allocation in China's stock market.At the same time,it has the same important practical significance to help our analysts improve their decision-making ability,correct their cognitive and behavioral deviations and promote the development of securities analysis industry norms.