Abstract
This study examines the cross-sectional determinants of the price reaction to analysts’ recommendations disseminated through various type of media and for firms listed in Taiwan stock markets. We measure abnormal returns using the market model of event study. Based on the type of media (traditional media/social media) and the type of exchange (Taiwan Stock Exchange (TWSE)/Taipei Exchange (TPEx)), we classify the combined sample observations into four samples and run quantile regressions to investigate whether the relation will be uniform across various quantile levels. Our results show that the relation between firm characteristics and cumulative abnormal returns is not homogeneous across various quantiles of abnormal returns. Our evidence indicates that in general the relation tends to be stronger for firms at higher performance quantile levels and tends to be more pronounced for TWSE firms. The strongest relation is found for the Traditional/TWSE sample, where the abnormal returns are positively related to insider ownership and prior-period earnings, and negatively related to institutional shareholding and price-to-book ratio for firms in the highest abnormal performance quantile.
Highlights
Retail investors eagerly look for all kinds of information for their investment decisions with the aim of beating the market
Empirical Results As discussed earlier, we aim to investigate the determinants of conditional distributions of cumulative abnormal returns (CAR) at different quantile levels
We examine the determinants of the stock performance of analysts’ recommendations for companies listed in Taiwan stock markets using quantile regression model
Summary
Retail investors eagerly look for all kinds of information for their investment decisions with the aim of beating the market. Researchers collect stock recommendations released in several media formats These include the ranking in subscription-based newsletters (e.g., Copeland & Mayers, 1982), news story in business magazines (e.g., Desai & Jain, 1995), news articles and recommendations in columns of newspapers (e.g., Barber & Loeffler, 1993; Tetlock, Saar-Tsechansky, & Macskassy, 2008), segments or shows on television stations (e.g., Engelberg, Sasseville, & Williams, 2012; Busse & Green, 2002), analyst forecasts in financial databases (e.g., Womack, 1996; Loh, 2010), and posts on internet social media (e.g., Antweiler & Frank, 2004; Chen et al, 2014). The third issue is related to what are the cross-sectional determinants of the average abnormal returns of stock recommendation
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