Analyst says a lot, but should you listen? Evidence from Russia

Purpose: This study aims to examine whether the publication of analyst recommendations has reaction in the Russian stock market. This study also aims to determine the other factors that influence the reaction. Design/methodology/approach: Event study analysis (ESA) and regression models are used in this study. Findings: The study finds that Russian stock market significantly reacts to analyst recommendations publications. Then study deeply investigates about the influence of other factors on the Russian market when an analyst's recommendations are published such as changes in recommendation levels, companies' size and general economic situation. The analysis done in the context of three types of recommendations: “buy,” “hold” and “sell.” The study finds that the market reacts not only to separate forecasts and subsequent recommendations, but also to the changes in recommendations' levels as well. Interestingly, the study finds that the impact of crises is not found to be a significant factor in the context of the Russian market. Research limitations/implications: Analysts used to spend much more resources on conducting a fundamental analysis than ordinary investors do. Therefore, they usually possess valuable privileged information that is supposed to influence stock prices when published. However, the present study argues that the direction, extent and period of a reaction of an analyst's recommendations are highly complicated and depend on what factors are under consideration in a particular research. Very often, the authors who dedicate their papers to develop and study markets choose a couple of (or even one) factors and delve into them. Nevertheless, to the author's best knowledge, few frequently cited and well-conducted research focused on such an emerging market as the Russian one. Thus, it seems reasonable that there is a gap in the literature that needs to be filled while considering other important factors. The study findings have a significant investment policy content. Originality/value: In several senses, the present study is unique. First, it investigates whether analyst recommendations sufficiently affect the Russian stock market; second, it determines whether the significant factors such as changes in recommendation levels, companies' size and general economic situation have influence on the reaction. Finally, the study discusses about whether there is an impact of crises in the present study findings. © 2019, Emerald Publishing Limited.

Vukovic D. 1, 2 , Ugolnikov V.3 , Maiti M.4
Emerald Group Publishing Ltd.
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  • 1 Department of Finance and Credit, Faculty of Economics, People's Friendship University of Russia (RUDN University, Moscow, Russian Federation
  • 2 Geographical Institute “Jovan Cvijic” of Serbian Academy of Sciences and Arts, Belgrade, Serbia
  • 3 Deloitte, Saint Petersburg, Russian Federation
  • 4 Department of Finance, National Research University Higher School of Economics, St. Petersburg School of Economics and Management, Saint Petersburg, Russian Federation
Analyst recommendations; Forecasts publication; Investors' reaction; Stock market reaction
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