Market's Reaction to Analytical Information From Brokerage Institutions: Empirical Evidence From Stock Market in Vietnam

Abstract

This paper examines the market’s reaction to brokerages’ recommendations on the Vietnamese stock market. The results indicate that stock analysts tend to show a drastically positive bias, with the overwhelming number of optimistic recommendations compared to negative ones. The abnormal rate of return following upscaling recommendations is positive, incremental, and statistically significant from the offered moment to a month later, which is consistent with results from different measures of the standard portfolio. However, the study has not found cogent evidence of the market reaction to downgrading recommendations. This research emphasizes the significant role of analytical information on the stock market in Vietnam, and the implications are discussed based on this study’s findings. The study results are the foundation for investors’ considerations about brokerages’ proposals before their trades.