{"title":"The price impact of analyst revisions and the state of the economy: Evidence around the world","authors":"Chen Su","doi":"10.1111/fire.12357","DOIUrl":null,"url":null,"abstract":"<p>This paper examines the price impact of analyst revisions in distinct economic states around the world. We find stronger average 2-day cumulative abnormal returns in bad times, though this pattern is mainly observed in developed countries. In addition, trading strategies following analyst revisions, with holding periods from 1 to 6 months, are generally more profitable in good times with lower macroeconomic uncertainty, after controlling for market and common risk factors. The profitability, however, disappears or declines substantially after accounting for time-varying risk premia conditioned on lagged macroeconomic information, indicating a reduced information production role played by analysts in recent decades.</p>","PeriodicalId":47617,"journal":{"name":"FINANCIAL REVIEW","volume":"58 4","pages":"887-930"},"PeriodicalIF":2.6000,"publicationDate":"2023-07-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://onlinelibrary.wiley.com/doi/epdf/10.1111/fire.12357","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"FINANCIAL REVIEW","FirstCategoryId":"1085","ListUrlMain":"https://onlinelibrary.wiley.com/doi/10.1111/fire.12357","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q2","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
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Abstract
This paper examines the price impact of analyst revisions in distinct economic states around the world. We find stronger average 2-day cumulative abnormal returns in bad times, though this pattern is mainly observed in developed countries. In addition, trading strategies following analyst revisions, with holding periods from 1 to 6 months, are generally more profitable in good times with lower macroeconomic uncertainty, after controlling for market and common risk factors. The profitability, however, disappears or declines substantially after accounting for time-varying risk premia conditioned on lagged macroeconomic information, indicating a reduced information production role played by analysts in recent decades.
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