Analyst recommendations, post-IPO stock returns and underwriter analysts' conflict of interest
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School of Business |
Bachelor's thesis
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Authors
Date
2019
Department
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
32 + 6
Series
Abstract
This study provides evidence on the significant investment value of analyst recom-mendations on newly public companies. The sample of this study comprises of 1,825 initial public offerings conducted 2010 to 2018 in NASDAQ, NYSE and NYSE American exchanges. I document that investment strategy following consensus recommendations by purchasing (selling short) stocks with most (least) favorable consensus recommen-dations yields significant monthly abnormal gross return of 1.6 percent. Moreover, this predictive power of consensus recommendations appears to be more pronounced for post-IPO stock performance in the first subsequent year of the IPO. In turn, the investment value of underwriter analysts’ recommendations is inferior to consensus recommendations as the recommendations of affiliated analysts do not pro-duce significant excess returns. The existing research has not covered the relation between analyst recommendations and post-IPO stock performance. However, the results are consistent with the prior re-search suggesting that analysts, in general, possess predictive power on stock perfor-mance.Description
Thesis advisor
Shin, SeanKeywords
Analyst recommendations, Initial public offerings, Stock returns, Underwriter analysts' conflict of interest