Sébastien Galanti

The profitability of financial analysts' Recommendations: evidence from an Emerging market

ABSTRACT This article aims at measuring recommendation value on the Tunisian market and uses a hand-collected database of 6646 recommendations (2005–2009). We apply the methodology of calendar–time portfolio analysis. This consists of simulating a portfolio that would include stocks depending on the recommendations issued by financial analysts. In order to measure abnormal (or ‘excess’) returns, the raw return of the portfolio is then compared to the evolution of the stock index and to the prediction of the Capital Asset-Pricing Model. Some of the portfolios we build earn a positive significant excess risk-adjusted return of 1.19% per month. Beyond the results that are in line with the literature, we provide two original results. First, ‘sell’ signals are informative, whereas ‘buy’ signals are not. We suggest that it is related to large (small) firms having more ‘buy’ (‘sell’) recommendations and to the direction of the market trend over the period. Second, the fact that recommendation levels have more impact than recommendation changes is explained by the specific informational context on that market, which is that recommendations are systematically disclosed each month, whereas on other markets, recommendations are produced only when the analyst has some new information to disclose.

Stock Analysts' Recommendations and Market Participation

This paper questions the role of analyst recommendation in investor decision. To do so, we propose a model in which the investor weights his own signal and the analyst recommendation to make his trading decision: buy, sell, or non-participation. The analyst is interested in the volume of transactions, which leads to a conflict of interest. We find that the investor probability to trade can, in some cases that we precise, be higher when the analyst does not truthfully reveal his information. Then no other investor could infer information from the volume of transactions.

Collective Management in an Agitated Market: The Dynamics of the Styles Starting from the Cards of Kohonen (La gestion collective dans un marche agite: la dynamique des styles a partir des cartes de Kohonen)

The aim of this paper is to observe the group dynamics of mutual fund managers during an interesting period (January 99-July 01); which includes many financial events as financial cracks, high speculation on new technologies.... We defined a strategy as the sensitivity on French stock market indexes. We projected strategies on a Kohonen Map. We propose a new approach to analyse the group dynamic by studying moving on this map.