Empirical study of investors’ reactions in response to analysts’ recommendations in Korean stock market

Analyst;Recommendation;Individual Investor;Institutional Investor;Investment Reaction

경영대학 경영학과 ;

University:서울대학교 대학원

关键词: Analyst;    Recommendation;    Individual Investor;    Institutional Investor;    Investment Reaction;   

Others  :  http://s-space.snu.ac.kr/bitstream/10371/124382/1/000000004820.pdf

美国|英语

来源: Seoul National University Open Repository

【 摘 要 】

This study is intended to analyze Korean stock market’s information efficiency by comparing investors’ reactions in response to analysts’ recommendations. Huge amounts of information are published in the market every day, and the investors probably choose whether to refer to the released information while making trading decisions or not. Definitely, the returns of these trading behaviors could be very different. I collected sample data for institutional investors and individual investors’ related trading records from 2001 through 2010 of Korean stock market, in order to analyze what behaviors the investors have taken and the difference of these investment behaviors’ performances after the information released in the market. The results are shown as follows.First of all, very severe upward biases exist in Korean analysts’ recommendations. Above 97 percentage of the total are positive recommendations, including Strong buy, Buy, and Hold, whereas merely approximately 3 percentage of the total recommendations are negative, namely Sell, and Strong sell. Secondly, the behaviors in response to these recommendations are quite different between institutional investors and individual investors. Institutional investors seem to have known the upward biases involved in the analysts’ recommendations. Therefore, they adjusted their investment decisions downward by one level, namely, made sell trading in response to hold, and made no adjustment of their positions in response to buy recommendations. Differently, individual investors didn’t show us a clear pattern about their trading behaviors in response to the recommendations of analysts.Finally, in analysis of the returns to these trading behaviors for the two groups, institutional investors who adjust downward the recommendations one level earned positive return, while individual investors who didn’t refer to the recommendations show poor investment performances.