Abstract
I construct and study a comprehensive novel dataset on Chinese equity analysts. I find the analysts possess significant forecasting skill. First, I find that more favorable recommendations predict better stock performance for at least six months after the recommendation. Second, the value of analyst recommendations is larger for smaller stocks and for the initial analyst coverage on a given stock. Third, I find evidence for analysts’ learning on the job. Fourth, I observe some persistence in analyst skill but it quickly mean-reverts. Finally, I show a simple feasible trading strategy following analyst recommendations to outperform the market by 11.60% annually.
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