Corredor Casado, María PilarFerrer Zubiate, ElenaSantamaría Aquilué, Rafael2020-01-152021-07-0120191062-940810.1016/j.najef.2019.04.008https://academica-e.unavarra.es/handle/2454/36077The 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.43 p.application/pdfeng© 2019 Elsevier Inc. This manuscript version is made available under the CC-BY-NC-ND 4.0.Investor sentimentFinancial analystAnalysts coverageRecommendationEarning forecastTranslational effectivenessinfo:eu-repo/semantics/articleinfo:eu-repo/semantics/openAccessAcceso abierto / Sarbide irekia