A Re-examination of Market Reactions to Business Week's 'Inside Wall Street' Column

Abstract

I re-examine the stock price reaction of stocks listed in Business Week's Inside Wall Street (IWS) column over the period July 1, 2002 to October 20, 2003. This study contributes to the existing literature by investigating the specific reason for the stocks' recommendation in the IWS column, differential industry effects, differential stock exchange effects, and differential effects based on price targets. Results indicate announcement period returns of about 3% in the three-day announcement window. These results are more pronounced for positive reports. However, these positive abnormal returns are more than offset by negative cumulative abnormal returns in the subsequent six-month period. Additional findings indicate that firms recommended by analysts experience a smaller (-1,1) window return but a larger (2,126) window return than those recommended by investment firms; that those firms included in the IWS column because they have an expanding product line or are a possible takeover target experience positive and significant abnormal returns over the (-1,1) window; that the positive announcement period cumulative abnormal returns appear to be sustainable only for certain industries; and that the announcement period abnormal returns are largest for those firms listed on the Nasdaq and for firms for which a price target was given in the IWS column.