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Does Analyst Optimism Fuel Stock Price Momentum?

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Title: Does Analyst Optimism Fuel Stock Price Momentum?
Authors: Lockwood, Jimmy (AUTHOR), Lockwood, Larry (AUTHOR), Miao, Hong (AUTHOR), Uddin, Mohammad Riaz (AUTHOR), Li, Keming (AUTHOR)
Source: Journal of Behavioral Finance. Oct-Dec2023, Vol. 24 Issue 4, p411-427. 17p.
Subjects: Behavior analysts, Securities analysts, Optimism, Investors, Cognitive bias, Surcharges
Abstract: Researchers have struggled to find rational risk factors that explain momentum profits derived from buying recent winners and shorting recent losers. Behavioral explanations have been offered that focus on the tendencies of investors to underreact to news and recommendations. Our study provides an alternative explanation centered on the behavior of sell-side analysts. We find a change in consensus recommendation from a hold to a buy is accompanied by an increase in momentum profits of 3.40% annually. Momentum profits fall, yet remain material, after the passage of Reg FD and the enactment of the Global Analyst Research Settlement. Our results support a behavioral explanation of investor cognitive biases fueled by analyst regency and optimism biases. [ABSTRACT FROM AUTHOR]
Copyright of Journal of Behavioral Finance is the property of Taylor & Francis Ltd and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)
Database: Psychology and Behavioral Sciences Collection
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  Label: Title
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  Data: Does Analyst Optimism Fuel Stock Price Momentum?
– Name: Author
  Label: Authors
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  Data: <searchLink fieldCode="AR" term="%22Lockwood%2C+Jimmy%22">Lockwood, Jimmy</searchLink> (AUTHOR)<br /><searchLink fieldCode="AR" term="%22Lockwood%2C+Larry%22">Lockwood, Larry</searchLink> (AUTHOR)<br /><searchLink fieldCode="AR" term="%22Miao%2C+Hong%22">Miao, Hong</searchLink> (AUTHOR)<br /><searchLink fieldCode="AR" term="%22Uddin%2C+Mohammad+Riaz%22">Uddin, Mohammad Riaz</searchLink> (AUTHOR)<br /><searchLink fieldCode="AR" term="%22Li%2C+Keming%22">Li, Keming</searchLink> (AUTHOR)
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  Data: <searchLink fieldCode="JN" term="%22Journal+of+Behavioral+Finance%22">Journal of Behavioral Finance</searchLink>. Oct-Dec2023, Vol. 24 Issue 4, p411-427. 17p.
– Name: Subject
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  Data: <searchLink fieldCode="DE" term="%22Behavior+analysts%22">Behavior analysts</searchLink><br /><searchLink fieldCode="DE" term="%22Securities+analysts%22">Securities analysts</searchLink><br /><searchLink fieldCode="DE" term="%22Optimism%22">Optimism</searchLink><br /><searchLink fieldCode="DE" term="%22Investors%22">Investors</searchLink><br /><searchLink fieldCode="DE" term="%22Cognitive+bias%22">Cognitive bias</searchLink><br /><searchLink fieldCode="DE" term="%22Surcharges%22">Surcharges</searchLink>
– Name: Abstract
  Label: Abstract
  Group: Ab
  Data: Researchers have struggled to find rational risk factors that explain momentum profits derived from buying recent winners and shorting recent losers. Behavioral explanations have been offered that focus on the tendencies of investors to underreact to news and recommendations. Our study provides an alternative explanation centered on the behavior of sell-side analysts. We find a change in consensus recommendation from a hold to a buy is accompanied by an increase in momentum profits of 3.40% annually. Momentum profits fall, yet remain material, after the passage of Reg FD and the enactment of the Global Analyst Research Settlement. Our results support a behavioral explanation of investor cognitive biases fueled by analyst regency and optimism biases. [ABSTRACT FROM AUTHOR]
– Name: AbstractSuppliedCopyright
  Label:
  Group: Ab
  Data: <i>Copyright of Journal of Behavioral Finance is the property of Taylor & Francis Ltd and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract.</i> (Copyright applies to all Abstracts.)
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      – Type: doi
        Value: 10.1080/15427560.2022.2025595
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      – Code: eng
        Text: English
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        PageCount: 17
        StartPage: 411
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      – SubjectFull: Behavior analysts
        Type: general
      – SubjectFull: Securities analysts
        Type: general
      – SubjectFull: Optimism
        Type: general
      – SubjectFull: Investors
        Type: general
      – SubjectFull: Cognitive bias
        Type: general
      – SubjectFull: Surcharges
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            – D: 01
              M: 10
              Text: Oct-Dec2023
              Type: published
              Y: 2023
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