Abstract
This paper investigates the information content of sell-side analyst stock recommendations as well as mutual fund holdings. Analysts and Mutual funds prefer growth stocks with high momentum. The levels of analyst recommendations and fund holdings hold little information that is value-relevant. Both changes in these recommendations and changes in holdings strongly predict future stock returns before we account for the characteristic preferences of mutual funds. However, after accounting for the characteristic preferences, changes in mutual fund holdings do not contain incremental ability to predict stock returns. In contrast, changes in analysts' recommendations predict future returns even after accounting for analysts' preferences for various characteristics. Our findings indicate that sell-side analysts' recommendation revisions are more informative than changes in the holdings of mutual funds.
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