Differences in the Predictive Value of Analyst Rating between Bull and Bear Markets——Based on Chinese Securities Market Data during 2005-2016

Abstract

Abstract:

Analyst recommendation is one of the most important information sources in the financial market. Stock ratings released by analysts have a significant impact on investors' decision-making and investment income. Based on Chinese securities market data during 2005 to 2016, we investigate the predictive value of analyst rating from the perspective of different market states. The empirical results indicate that:(1) Analyst rating is of predictive value in the market, as evidenced by the tendency that the higher rating analysts give to a stock, the better performance the stock will have; (2) Market condition is a key factor that affects the rating results of analysts, who give different ratings under different market conditions; (3) The positive ratings issued in the bear market have more predictive value than these in the bull market; the predictive value of neutral ratings is not significantly different between the bull market and bear market. In the short term, the negative ratings issued in the bear market have more predictive value than these issued in the bull market. This research has important theoretical and practical significance for investors to understand the information role of security analysts and make better-informed decisions on investment.

Key words: security analyst, analyst rating, predictive value, bull and bear market, market condition difference

Guo Yanhong, Jiang Shuai, Chen Yanping. Differences in the Predictive Value of Analyst Rating between Bull and Bear Markets——Based on Chinese Securities Market Data during 2005-2016[J]. , 2019, 31(8): 14-25.

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