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Market response to analyst recommendations in the “dartboard” column: the information and price‐pressure effects
Author(s) -
Albert Robert L.,
Smaby Timothy R.
Publication year - 1996
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/s1058-3300(96)90006-3
Subject(s) - contest , economics , event study , event (particle physics) , econometrics , monetary economics , financial economics , political science , biology , law , paleontology , context (archaeology) , physics , quantum mechanics
The market response to securities selected by analysts featured in the “Dartboard” column of The Wall Street Journal (WSJ) is the subject of this study. Prior studies have reported significantly positive abnormal returns on the WSJ issue date, followed by a partial price reversal, suggesting that the initial response is partially attributable to price pressure. If we use a post‐event instead of a pre‐event estimation period, we find a similar event day response but no significant reversal. Though we are unable to reject the possibility of a price pressure effect, our results are generally consistent with the existence of an information effect. We also detect a differential response to securities recommended by analysts invited back to the contest and those recommended by newcomers, suggesting that the information effect is related to the market following recommendations of potentially superior analysts.