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  • Journal of Financial and Quantitative Analysis, Volume 41, Issue 1
  • March 2006, pp. 25-49

How Do Analyst Recommendations Respond to Major News?

  • Jennifer Conrad (a1), Bradford Cornell (a2), Wayne R. Landsman (a3) and Brian R. Rountree (a4)
  • DOI:
  • Published online: 01 April 2009

We examine how analysts respond to public information when setting stock recommendations. We model the determinants of analysts' recommendation changes following large stock price movements. We find evidence of an asymmetry following large positive and negative returns. Following large stock price increases, analysts are equally likely to upgrade or downgrade. Following large stock price declines, analysts are more likely to downgrade. This asymmetry exists after accounting for investment banking relationships and herding behavior. This result suggests recommendation changes are “sticky” in one direction, with analysts reluctant to downgrade. Moreover, this result implies that analysts' optimistic bias may vary through time.

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Journal of Financial and Quantitative Analysis
  • ISSN: 0022-1090
  • EISSN: 1756-6916
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