Outperforming the market: a comparison of Star and NonStar analysts’ investment strategies and recommendations
Abstract We employ StarMine to investigate the impact of analyst recommendations on stock performance. We test whether star-ranked analysts generate abnormal returns and outperform non-stars in short and long portfolios. Utilizing buy-and-hold calendar-time portfolio methodology, we calculate portfo...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Springer Nature
2024-01-01
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| Series: | Humanities & Social Sciences Communications |
| Online Access: | https://doi.org/10.1057/s41599-023-02527-8 |
| _version_ | 1797363489198571520 |
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| author | Darko B. Vukovic Orifjon O. U. Kurbonov Moinak Maiti Mustafa Özer Milan Radovanovic |
| author_facet | Darko B. Vukovic Orifjon O. U. Kurbonov Moinak Maiti Mustafa Özer Milan Radovanovic |
| author_sort | Darko B. Vukovic |
| collection | DOAJ |
| description | Abstract We employ StarMine to investigate the impact of analyst recommendations on stock performance. We test whether star-ranked analysts generate abnormal returns and outperform non-stars in short and long portfolios. Utilizing buy-and-hold calendar-time portfolio methodology, we calculate portfolio alphas using various asset pricing models, including CPM, the Fama and French 3-factor model, and the Carhart 4-factor model. Results indicate that all analyst groups can generate abnormal returns exceeding the market average. Star-ranked analysts outperform non-stars in short portfolios by 0.5523% in monthly alpha, though no significant difference exists in long portfolio alphas. We also conduct regressor endogeneity tests and explore investor sentiment mechanisms by utilizing the GARCH model and frequency-domain causality analysis, with NASDAQ as a proxy for investor sentiment. These tests reveal that the momentum factor is exogenous, and investor sentiments have a statistically significant positive effect on stock return volatility, with changes occurring between 5 and 10 days. This research underscores the value of analyst insights for investors, validates StarMine’s ranking effectiveness, and suggests market participants can benefit from incorporating analyst recommendations into their investment decisions. Our study makes a significant contribution to the existing literature by introducing a novel approach to understanding investor sentiment mechanisms through a causality model. |
| first_indexed | 2024-03-08T16:22:05Z |
| format | Article |
| id | doaj.art-1e0390572a914440bee8c1abb9dcf1c6 |
| institution | Directory Open Access Journal |
| issn | 2662-9992 |
| language | English |
| last_indexed | 2024-03-08T16:22:05Z |
| publishDate | 2024-01-01 |
| publisher | Springer Nature |
| record_format | Article |
| series | Humanities & Social Sciences Communications |
| spelling | doaj.art-1e0390572a914440bee8c1abb9dcf1c62024-01-07T12:16:33ZengSpringer NatureHumanities & Social Sciences Communications2662-99922024-01-0111111510.1057/s41599-023-02527-8Outperforming the market: a comparison of Star and NonStar analysts’ investment strategies and recommendationsDarko B. Vukovic0Orifjon O. U. Kurbonov1Moinak Maiti2Mustafa Özer3Milan Radovanovic4Graduate School of Management, Saint Petersburg State UniversitySchool of Accounting and Finance, University of VaasaIndependent ResearcherDepartment of Economics, Faculty of Economics and Administrative Sciences, Anadolu UniversityGeographical Institute “Jovan Cvijic” SASAAbstract We employ StarMine to investigate the impact of analyst recommendations on stock performance. We test whether star-ranked analysts generate abnormal returns and outperform non-stars in short and long portfolios. Utilizing buy-and-hold calendar-time portfolio methodology, we calculate portfolio alphas using various asset pricing models, including CPM, the Fama and French 3-factor model, and the Carhart 4-factor model. Results indicate that all analyst groups can generate abnormal returns exceeding the market average. Star-ranked analysts outperform non-stars in short portfolios by 0.5523% in monthly alpha, though no significant difference exists in long portfolio alphas. We also conduct regressor endogeneity tests and explore investor sentiment mechanisms by utilizing the GARCH model and frequency-domain causality analysis, with NASDAQ as a proxy for investor sentiment. These tests reveal that the momentum factor is exogenous, and investor sentiments have a statistically significant positive effect on stock return volatility, with changes occurring between 5 and 10 days. This research underscores the value of analyst insights for investors, validates StarMine’s ranking effectiveness, and suggests market participants can benefit from incorporating analyst recommendations into their investment decisions. Our study makes a significant contribution to the existing literature by introducing a novel approach to understanding investor sentiment mechanisms through a causality model.https://doi.org/10.1057/s41599-023-02527-8 |
| spellingShingle | Darko B. Vukovic Orifjon O. U. Kurbonov Moinak Maiti Mustafa Özer Milan Radovanovic Outperforming the market: a comparison of Star and NonStar analysts’ investment strategies and recommendations Humanities & Social Sciences Communications |
| title | Outperforming the market: a comparison of Star and NonStar analysts’ investment strategies and recommendations |
| title_full | Outperforming the market: a comparison of Star and NonStar analysts’ investment strategies and recommendations |
| title_fullStr | Outperforming the market: a comparison of Star and NonStar analysts’ investment strategies and recommendations |
| title_full_unstemmed | Outperforming the market: a comparison of Star and NonStar analysts’ investment strategies and recommendations |
| title_short | Outperforming the market: a comparison of Star and NonStar analysts’ investment strategies and recommendations |
| title_sort | outperforming the market a comparison of star and nonstar analysts investment strategies and recommendations |
| url | https://doi.org/10.1057/s41599-023-02527-8 |
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