Abstract
The study analysed the price behaviour of stocks recorded under Børsens Aktiepanel in the Danish business magazine Børsen. These stocks make up the components of the KFXindex, which serves as the main index for the Danish stock market. No significant abnormal return was observed during the 6‐day event period when either a new ʺstrong buyʺ or a new ʺsellʺ recommendation was published. Significant positive abnormal returns were noticed in the post‐sell recommendation period. At the same time the KFX index yielded a positive return. This means that analysts´ recommendations concerning the observed stocks surrounding the event day did not seem to offer any value to investors. ʺSellʺ recommendations served as contrarian signals in the long term. ʺBuyʺ recommendations never offered any value in excess of market index return. According to the results of this study, analysts on the Danish market do not have timing abilities.
Highlights
The Danish stock market has a small market capital value but it is a very active market and closely followed by financial institutions and the media
The business paper Børsen is to the Danish market what the Financial Times and the Wall Street Journal are to the UK and the USA, respectively
The event studys aim was to find if investors could enjoy abnormal returns by following the analystsadvice and to compare the returns from recommended stocks to the returns from the KFX index
Summary
The Danish stock market has a small market capital value but it is a very active market and closely followed by financial institutions and the media. Børsens Aktiepanel consists of 20 stocks that comprise the KFX index which is the main index of the Danish stock market and serves a similar purpose as the CAC 40 index in France or the FTSE index in the UK. This event study aimed to find out whether analysts can pick stocks among the KFX index that outperform the indexs return. The stocks in the Aktiepanel are not all covered by the same investment institution and some stocks enjoy more coverage than others This event study only dealt withstrong buyandsellrecommendations, i.e. the most extreme recommendations given. Prior to the 8th of August 2002 changes had been made to the list of recommended stocks in the Børsen Aktiepanel ( with change of elements in the KFX index) that would have ruled out comparison with the current list
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