The role of sentiment and stock characteristics in the translation of analysts’ forecasts into recommendations

Corredor Casado, María Pilar; Ferrer Zubiate, Elena; Santamaría Aquilué, Rafael

Publication:
The role of sentiment and stock characteristics in the translation of analysts’ forecasts into recommendations

dc.contributor.author	Corredor Casado, María Pilar
dc.contributor.author	Ferrer Zubiate, Elena
dc.contributor.author	Santamaría Aquilué, Rafael
dc.contributor.department	Enpresen Kudeaketa	eu
dc.contributor.department	Institute for Advanced Research in Business and Economics - INARBE	en
dc.contributor.department	Gestión de Empresas	es_ES
dc.date.accessioned	2020-01-15T11:54:54Z
dc.date.available	2021-07-01T23:00:15Z
dc.date.issued	2019
dc.description.abstract	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.	en
dc.description.sponsorship	This paper has received financial support from the Spanish Ministry of Economy and Competitiveness (ECO2012-35946-C02-01 and ECO2016-77631-R (AEI/FEDER, UE). Elena Ferrer would also like to acknowledge a Scientific Research Grant from the Fundación Banco Herrero 2012.	en
dc.embargo.lift	2021-07-01
dc.embargo.terms	2021-07-01
dc.format.extent	43 p.
dc.format.mimetype	application/pdf	en
dc.identifier.doi	10.1016/j.najef.2019.04.008
dc.identifier.issn	1062-9408
dc.identifier.uri	https://academica-e.unavarra.es/handle/2454/36077
dc.language.iso	eng	en
dc.publisher	Elsevier	en
dc.relation.ispartof	North American Journal of Economics and Finance, 49 (2019) 252-272	en
dc.relation.projectID	info:eu-repo/grantAgreement/MINECO//ECO2012-35946-C02-01/ES/	en
dc.relation.publisherversion	https://doi.org/10.1016/j.najef.2019.04.008
dc.rights	© 2019 Elsevier Inc. This manuscript version is made available under the CC-BY-NC-ND 4.0.	en
dc.rights.accessRights	info:eu-repo/semantics/openAccess	en
dc.rights.accessRights	Acceso abierto / Sarbide irekia	es
dc.rights.uri	http://creativecommons.org/licenses/by-nc-nd/4.0/
dc.subject	Investor sentiment	en
dc.subject	Financial analyst	en
dc.subject	Analysts coverage	en
dc.subject	Recommendation	en
dc.subject	Earning forecast	en
dc.subject	Translational effectiveness	en
dc.title	The role of sentiment and stock characteristics in the translation of analysts’ forecasts into recommendations	en
dc.type	info:eu-repo/semantics/article
dc.type.version	info:eu-repo/semantics/acceptedVersion	en
dc.type.version	Versión aceptada / Onetsi den bertsioa	es
dspace.entity.type	Publication
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