What are analysts really good at?

Sell-side analysts employ different benchmarks when defining their stock recommendations. Forexample, a ‘buy’ for some brokers means the stock is expected to outperform its peers in the same sector(“industry benchmarkers”), while for other brokers it means the stock is expected to outperform themark...

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Main Authors: KADAN, Ohad, MADUREIRA, Leonardo, WANG, Rong, ZACH, Tzachi.
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Language:English
Published: Institutional Knowledge at Singapore Management University 2012
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/5413
https://ink.library.smu.edu.sg/context/lkcsb_research/article/6412/viewcontent/SSRN_id1961199.pdf
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spelling sg-smu-ink.lkcsb_research-64122018-01-12T06:17:15Z What are analysts really good at? KADAN, Ohad MADUREIRA, Leonardo WANG, Rong ZACH, Tzachi. Sell-side analysts employ different benchmarks when defining their stock recommendations. Forexample, a ‘buy’ for some brokers means the stock is expected to outperform its peers in the same sector(“industry benchmarkers”), while for other brokers it means the stock is expected to outperform themarket (“market benchmarkers”), or just some absolute return (“total benchmarkers”). We use thesebenchmarks to analyze the role of stock picking, industry picking and market timing in contributing to theperformance of stock recommendations. We are able to do so given that different benchmarks suggest theuse of different sets of abilities. Analysis of the relation between analysts’ recommendations and theirlong-term growth and earnings forecasts suggests that analysts indeed abide by their benchmarks. We findstrong evidence that the investment value of stock recommendations stems from analysts picking winnersand losers within a particular industry (stock picking) regardless of the declared benchmark. We find noevidence of either industry picking or market timing even for analysts whose benchmarks suggest theexistence of such skills. The research carries implications for the correct understanding and interpretationof sell-side research and its investment value. 2012-01-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/5413 info:doi/10.2139/ssrn.1961199 https://ink.library.smu.edu.sg/context/lkcsb_research/article/6412/viewcontent/SSRN_id1961199.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Analysts Benchmarks Stock Picking Industry Picking Market Timing Finance Finance and Financial Management
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Analysts
Benchmarks
Stock Picking
Industry Picking
Market Timing
Finance
Finance and Financial Management
spellingShingle Analysts
Benchmarks
Stock Picking
Industry Picking
Market Timing
Finance
Finance and Financial Management
KADAN, Ohad
MADUREIRA, Leonardo
WANG, Rong
ZACH, Tzachi.
What are analysts really good at?
description Sell-side analysts employ different benchmarks when defining their stock recommendations. Forexample, a ‘buy’ for some brokers means the stock is expected to outperform its peers in the same sector(“industry benchmarkers”), while for other brokers it means the stock is expected to outperform themarket (“market benchmarkers”), or just some absolute return (“total benchmarkers”). We use thesebenchmarks to analyze the role of stock picking, industry picking and market timing in contributing to theperformance of stock recommendations. We are able to do so given that different benchmarks suggest theuse of different sets of abilities. Analysis of the relation between analysts’ recommendations and theirlong-term growth and earnings forecasts suggests that analysts indeed abide by their benchmarks. We findstrong evidence that the investment value of stock recommendations stems from analysts picking winnersand losers within a particular industry (stock picking) regardless of the declared benchmark. We find noevidence of either industry picking or market timing even for analysts whose benchmarks suggest theexistence of such skills. The research carries implications for the correct understanding and interpretationof sell-side research and its investment value.
format text
author KADAN, Ohad
MADUREIRA, Leonardo
WANG, Rong
ZACH, Tzachi.
author_facet KADAN, Ohad
MADUREIRA, Leonardo
WANG, Rong
ZACH, Tzachi.
author_sort KADAN, Ohad
title What are analysts really good at?
title_short What are analysts really good at?
title_full What are analysts really good at?
title_fullStr What are analysts really good at?
title_full_unstemmed What are analysts really good at?
title_sort what are analysts really good at?
publisher Institutional Knowledge at Singapore Management University
publishDate 2012
url https://ink.library.smu.edu.sg/lkcsb_research/5413
https://ink.library.smu.edu.sg/context/lkcsb_research/article/6412/viewcontent/SSRN_id1961199.pdf
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