Information Content of Equity Analyst Reports
This paper catalogs the complete text of a large sample of All-American Analyst reports and examines the market reaction to the information released. It shows that the text of the report, which provides the justifications supporting an analyst's summary opi...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | en_US |
| Published: |
2004
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| Subjects: | |
| Online Access: | http://hdl.handle.net/1721.1/7345 |
| _version_ | 1826203968740524032 |
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| author | Asquith, Paul Mikhail, Michael Au, Andrea |
| author_facet | Asquith, Paul Mikhail, Michael Au, Andrea |
| author_sort | Asquith, Paul |
| collection | MIT |
| description | This paper catalogs the complete text of a large sample of All-American Analyst reports and examines the market
reaction to the information released. It shows that the text of the report, which provides the justifications supporting
an analyst's summary opinion, provides information beyond that contained in earnings forecasts, recommendation
levels, and price targets. Including the strength of the analyst's justifications, reduces, and in some models
eliminates, the significance of the information available in earnings forecasts and recommendation revisions. By
controlling for the simultaneous release of other information, we show that analyst reports do not merely repeat firm
releases of information, but also provide both new information and/or interpretation of previously released
information to the market. By examining whether the market's reaction differs by report type (i.e. upgrade,
reiteration, or downgrade), we demonstrate that information in a report is most important for downgrades and that
target prices and the strength of the justifications are the only elements that matter for reiterations. Finally, we find
no correlation between the valuation methodology used by analysts and either the market's reaction to a report's
release or the analyst's accuracy. Our adjusted R2 of nearly 26% is three or four times larger than that of other
studies using only partial content from analyst reports. |
| first_indexed | 2024-09-23T12:46:45Z |
| format | Working Paper |
| id | mit-1721.1/7345 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T12:46:45Z |
| publishDate | 2004 |
| record_format | dspace |
| spelling | mit-1721.1/73452019-04-12T09:32:13Z Information Content of Equity Analyst Reports Asquith, Paul Mikhail, Michael Au, Andrea Stock recommendations price targets earnings forecasts security analysts This paper catalogs the complete text of a large sample of All-American Analyst reports and examines the market reaction to the information released. It shows that the text of the report, which provides the justifications supporting an analyst's summary opinion, provides information beyond that contained in earnings forecasts, recommendation levels, and price targets. Including the strength of the analyst's justifications, reduces, and in some models eliminates, the significance of the information available in earnings forecasts and recommendation revisions. By controlling for the simultaneous release of other information, we show that analyst reports do not merely repeat firm releases of information, but also provide both new information and/or interpretation of previously released information to the market. By examining whether the market's reaction differs by report type (i.e. upgrade, reiteration, or downgrade), we demonstrate that information in a report is most important for downgrades and that target prices and the strength of the justifications are the only elements that matter for reiterations. Finally, we find no correlation between the valuation methodology used by analysts and either the market's reaction to a report's release or the analyst's accuracy. Our adjusted R2 of nearly 26% is three or four times larger than that of other studies using only partial content from analyst reports. 2004-11-23T15:33:44Z 2004-11-23T15:33:44Z 2004-11-23T15:33:44Z Working Paper http://hdl.handle.net/1721.1/7345 en_US MIT Sloan School of Management Working Paper;4264-02 205481 bytes application/pdf application/pdf |
| spellingShingle | Stock recommendations price targets earnings forecasts security analysts Asquith, Paul Mikhail, Michael Au, Andrea Information Content of Equity Analyst Reports |
| title | Information Content of Equity Analyst Reports |
| title_full | Information Content of Equity Analyst Reports |
| title_fullStr | Information Content of Equity Analyst Reports |
| title_full_unstemmed | Information Content of Equity Analyst Reports |
| title_short | Information Content of Equity Analyst Reports |
| title_sort | information content of equity analyst reports |
| topic | Stock recommendations price targets earnings forecasts security analysts |
| url | http://hdl.handle.net/1721.1/7345 |
| work_keys_str_mv | AT asquithpaul informationcontentofequityanalystreports AT mikhailmichael informationcontentofequityanalystreports AT auandrea informationcontentofequityanalystreports |