Open Access
The role of sentiment and stock characteristics in the translation of analysts’ forecasts into recommendations
(Elsevier, 2019) Corredor Casado, María Pilar; Ferrer Zubiate, Elena; Santamaría Aquilué, Rafael; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE; Gestión de Empresas
The purpose of this paper is to further understanding of the determinants of analysts’ translational effectiveness and, specifically, the role of stock characteristics in the impact of sentiment in the translation of analysts’ forecasts into recommendations. We construct a proxy of intrinsic value of a stock based on that of Ohlson (1995), which incorporates all the information contained in the analysts’ earnings forecasts. Our results show that, although analysts do translate their earnings forecast valuations into recommendations, the effectiveness of this process is reduced by investor sentiment only in highly sentiment-sensitive stocks. This suggests the degree of analyst coverage as a potential conditioner of the observable results in a market. While not totally eliminating this observed effect, the Market Abuse Directive regulation does contribute to reduce the skew between analysts’ earnings forecasts and their recommendations. Finally, analysis of this effect reveals that this kind of skew enables investment strategies yielding positive risk-adjusted returns in highly sentiment-sensitive stocks, during periods of high market sentiment.
Open Access
The information environment, informed trading and volatility
(Routledge, 2017) Blasco de las Heras, Natividad; Corredor Casado, María Pilar; Gestión de Empresas; Enpresen Kudeaketa
The relation between informed trading and volatility is analyzed using the change in the proportion of informed transactions calculated through the probability of informed trading variable. The analysis relates to the Spanish market during 1997–2010, given that the Spanish market covers a very diverse range of listed companies. Some companies are comparable to companies listed on U.S. markets while others are smaller in size and have a lower trading volume and inferior quality of information. The methodology is based on a modification of the model proposed by Avramov, Chordia, and Goyal [2006]. The authors’ proposal incorporates the change in the proportion of informed transactions, calculated with intraday data, into the volatility model. The results are also presented using a conditional volatility model in which the change in the proportion of informed transactions is incorporated. These results attest to the influence of informed trading as a price-stabilizing factor in heavily traded and highly capitalized stocks (familiar stocks). Informed trading leads to a marked decrease in volatility for these particular stocks both in periods of calm and crisis.
Open Access
Value of analysts’ consensus recommendations and investor sentiment
(Taylor & Francis, 2013) Corredor Casado, María Pilar; Ferrer Zubiate, Elena; Santamaría Aquilué, Rafael; Gestión de Empresas; Enpresen Kudeaketa
This paper studies the effect of investor sentiment on analysts' consensus recommendations. Our results show that the optimistic bias of analysts in the issuing of recommendations is affected by investor sentiment: the greater the investor sentiment, the more optimistically biased the analysts’ consensus recommendations. This bias is larger in stocks whose characteristics make them hard to value or to arbitrage. We also show that investor sentiment can help in the design of profitable strategies, particularly when taking the short position in portfolios with high sentiment sensitivity stocks.
Open Access
Does family ownership always reduce default risk?
(Wiley, 2021) Abinzano Guillén, María Isabel; Corredor Casado, María Pilar; Martínez García, Beatriz; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE; Gestión de Empresas
This paper analyses the effect of family ownership on the outcome of the firm’s risk‐taking activities, measured by the company’s default risk. We show that family ownership reduces the probability of default, which is proxied by the Black–Scholes–Merton (BSM) model. Our study goes further than the initial approach by taking into account certain factors conditioning the aforementioned relationship. We find that the expected negative relationship between family ownership and default risk is modified when there is a significant participation of institutional investors, whose positive moderating influence intensifies if they are stable and long‐term oriented and/or during adverse financial circumstances.
Open Access
Analyst responses to changes in credit risk
(Wiley, 2025-02-03) Abinzano Guillén, María Isabel; Corredor Casado, María Pilar; Martínez García, Beatriz; Gestión de Empresas; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE
Do analysts adjust their recommendations when a company's credit risk changes? Using an extensive sample of 300,145 observations, covering 3722 US firms from 2000 to 2021, we find that analysts revise their recommendations when a firm's credit risk decreases but not when it increases. This result is consistent with analysts¿ optimism bias, as previously identified in the literature. However, we further find that this optimism bias disappears for firms with low information asymmetry or good informativeness. The fact that analysts for these firms have less cognitive bias and greater pressure to make accurate recommendations may explain this result. Our research highlights that analyst disclosures should be treated with caution, especially in firms with poor informational characteristics. A proper understanding of analyst recommendations is critical for the decision-making processes of investors and companies and calls for better regulations.
Open Access
Investor sentiment effect in stock markets: stock characteristics or country-specific factors?
(Elsevier, 2013) Corredor Casado, María Pilar; Ferrer Zubiate, Elena; Santamaría Aquilué, Rafael; Gestión de Empresas; Enpresen Kudeaketa
This paper analyzes the investor sentiment effect in four key European stock markets: France, Germany, Spain and the UK. The findings show that sentiment has a significant influence on returns, varying in intensity across markets. The variation appears to involve both stock characteristics and cross-country cultural or institutional differences. The results also show sensitivity to the choice of sentiment proxy.
Open Access
Is there an expiration effect in the bitcoin market?
(Elsevier, 2023) Blasco de las Heras, Natividad; Corredor Casado, María Pilar; Satrústegui, N.; Gestión de Empresas; Enpresen Kudeaketa; Institute for Advanced Research in Business and Economics - INARBE
This paper studies the monthly expiration effect in the bitcoin markets. The emergence of trading in bitcoin futures in regulated markets is an ideal occasion to test this effect on an asset with singular characteristics. Our results with intraday data show that around the time of maturity there are significant changes in the trading volume, volatility and return of bitcoin, an asset that is traded in many exchanges simultaneously. Therefore, there is a clear expiration effect related to bitcoin futures. The closer to the expiration time (shortly beforehand or afterwards), the more intense these effects are. However, in spite of these general results, the expiration effect is not homogeneous across exchanges and depends on the characteristics of the futures contract in question. Robustness tests are also applied to confirm the results. The increasing participation of institutional investors is consistent with our findings, particularly in relation to the expiration effects of cash-settled futures, as these contracts are more appealing for sophisticated investors who could be interested in arbitrage or speculative processes.
Open Access
Market sentiment: a key factor of investors' imitative behaviour
(Wiley, 2012) Blasco de las Heras, Natividad; Corredor Casado, María Pilar; Ferreruela Garcés, Sandra; Gestión de Empresas; Enpresen Kudeaketa; Gobierno de Navarra / Nafarroako Gobernua
The aim of this paper is to explore herding behavior among investors in order to determine its rational and emotional component factors and identify relationships among them. We apply causality tests to evaluate the impact of return and market sentiment on herding intensity. The herding intensity is quantified using the measure developed by Patterson and Sharma (2006). The research was conducted during the period 1997-2003 in the Spanish stock market, where the presence of herding has been confirmed. The results reveal that the herding intensity depends on past returns and sentiment or subjective assessments and confirm the presence of both a rational and an emotional factor.
Open Access
The impact of investor sentiment on stock returns in emerging markets. The case of Central European markets
(Taylor & Francis, 2015) Corredor Casado, María Pilar; Ferrer Zubiate, Elena; Santamaría Aquilué, Rafael; Gestión de Empresas; Enpresen Kudeaketa
This paper studies the effect of investor sentiment on stock returns in three Central European markets: the Czech Republic, Hungary and Poland. The results show that sentiment is a key variable in the prices of stocks traded on these markets and its impact is stronger here than in more developed European markets. This effect is linked to stock characteristics, particularly those considered to make stocks more prone to the influences of investor sentiment. The evidence shows that the effect is not uniform across countries, since higher levels are found for Poland and the Czech Republic, thus confirming the role of country-specific factors in the impact of investor sentiment on stock prices. The results also confirm that sentiment is a twofold (global and local) phenomenon, in which the global dimension has much greater impact than the local dimension, at least in the markets considered. Finally, the paper has shown that sentiment does not spread, at least to any significant degree, through the movement of capital between markets. This strengthens the argument that sentiment is transmitted through a behavioral mechanism. If this argument proves correct, there is little likelihood of local regulatory action being very effective in limiting the perverse impact of asset bubbles.
Open Access
Is cognitive bias really present in analyst forecasts? The role of investor sentiment
(Elsevier, 2014) Corredor Casado, María Pilar; Ferrer Zubiate, Elena; Santamaría Aquilué, Rafael; Gestión de Empresas; Enpresen Kudeaketa
This paper analyses four key markets within the European context. In this context, where the level of analyst coverage is lower than in the US setting, we aim to ascertain whether the origin of optimism in analyst forecasts in these markets is mainly strategic or whether it also contains an element of cognitive bias. Despite the fact that forecast errors lack the explanatory power to account for a significant percentage of the relationship between market sentiment and future stock returns, our new tests based on selection bias (SB1 and SB2), in conjunction with an analysis of abnormal trading volume, confirm the presence of both cognitive bias and strategic behaviour in analyst forecasts. This shows that, although regulation can reduce analyst optimism bias, the benefits are constrained by the fact that optimism bias is partly associated with cognitive bias.