Predictive variables and the lure of glamour stocks in the formation of analyst recommendations: An empirical study based on the Swedish stock market
Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
This study examines whether or not analysts’ recommendations accurately reflect the information provided by the companies’ fundamental- and technical indicators, using six different variables that have been proven to have predictive power for future returns. Furthermore, this study investigates if analysts particularly tend to favor glamour stocks in the formation of stock recommendations, a phenomenon that have occurred on the US stock market. It was found that analysts’ recommendations are correlated in the direction that would be expected, even though this is only significant for the historical price change predictive variable. The historical price change variable is also the only established glamour characteristic that is identified as favored by analysts. The results from the tests and the descriptive statistics are analyzed from a behavioral perspective using the three psychological theories: herding behavior, cognitive dissonance, and prospect theory. Bearing in mind that these psychological factors do influence analysts, it is still concluded that analysts’ recommendations do play a useful role for investors since analysts’ recommendations have predictive power for future returns.
Place, publisher, year, edition, pages
IdentifiersURN: urn:nbn:se:su:diva-3911OAI: oai:DiVA.org:su-3911DiVA: diva2:193302