Abstract

Will investors earn expected stock returns when they completely rely on the public information released by companies (i.e., the company's annual report or the securities company's recommendation)? The statement may be valid under the effective market hypothesis (EMH) and benevolent companies. However, the two conditions do not match the reality due to information lags and conflict of interest between buyers and sellers. This paper designs two methods to test the effectiveness of recommendations from securities companies in the Chinese stock market. We collect all stocks' information on the broader market's price trend, individual stock price state, and volume to evaluate the value of public information from securities companies for stock returns. The results imply that the target securities company's recommendations are not effective.

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