\n<\/p>\n
But producing market-moving research is incredibly difficult. Thousands of investment professionals are constantly evaluating publicly-listed companies. For an analyst report to move a stock price significantly, it must offer new insights that investors have not yet incorporated into their valuations.<\/p>\n
In a 2011 study where my co-author and I examined more than 150,000 analyst recommendation changes for US stocks, we found only about one in eight such changes were accompanied by a large stock-price movement in the direction of the change. Most had no discernible impact on share prices, when measured from the day the recommendation was issued through the following trading day.<\/p>\n
To illustrate just how difficult it is to produce market-moving research, one in four analysts in our study never issued a single influential recommendation change. Even among those who had managed to move stock prices at least once, only one in five of their recommendation changes were significant.<\/p>\n
So, when does an analyst recommendation change become impactful?<\/p>\n
Track record matters. Analysts who have moved markets before, won awards or have a history of issuing recommendations ahead of their peers tend to be more influential.<\/p>\n
Recommendations that move away from the prevailing consensus, or are accompanied by earnings forecasts, are more likely to move stock prices too.<\/p>\n
Company characteristics also play a role. Analyst recommendations tend to be more influential for smaller companies, growth stocks, and companies where analysts disagree considerably about future earnings.<\/p>\n
These findings are based on historical US data but the underlying economic reasoning suggests that similar forces may operate here in the Singapore market.\u00a0<\/p>\n<\/div>\n
\n