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Bucking the Trend: The Informativeness of Analyst Contrarian Recommendations
Author(s) -
Bradley Daniel,
Liu Xi,
Pantzalis Christos
Publication year - 2014
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/fima.12037
Subject(s) - contrarian , downgrade , business , stock price , stock (firearms) , accounting , financial economics , economics , actuarial science , finance , computer science , computer security , mechanical engineering , paleontology , series (stratigraphy) , engineering , biology
This paper examines price reactions to analysts’ recommendations issued in the opposite direction of recent stock price movements. We find that upgrade and downgrade contrarian recommendations induce larger market reactions than noncontrarian recommendations, consistent with the view that they are more informative. These results are strongest in the period before Regulation Fair Disclosure, consistent with the view that private information was likely curbed after its implementation. Contrarian downgrades are more likely to be issued by all‐star analysts, but less likely by experienced and busy analysts suggesting that contrarian recommendations are subject to career concerns.