Can anybody think of a good study looking at recommendations from Equity Research - buy/hold/sell - and whether they have predictive power over the subsequent performance of the stock relative to the market. It would be interesting to see whether any house -GS, Morgan, Citi -has statistically significant past performance record, or whether it all can be explained though randomness.
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Check this out. From the WSJ, a couple weeks ago:
http://online.wsj.com/article/SB100014240527487038087045760620339267419…
Interesting article. If anybody know more - please post them here, I am sure this subject has been discussed heavily, around market efficiency theory and such. There was one popular study claiming monkey throwing darts at stocks would do no worse than most funds, but I cannot find the link at the moment. What would be interesting to see whether any particular house is better or worse historically, e.g. GS vs small firms, etc.
I personally like to think of all equity research business model as"assurance" - they just wrap the prevalent sentiment into nice phrases and numbers to carry around, so as to make sense of the things... But as to answering where the things are going to be tomorrow - that's another story.
Great article to read, thanks.
Can someone please explain to me the point of the "hold" recommendation? Why would you want to hold something that's not goingto go up, and if it's predicted to go up, why wouldn't you want to buy it ?
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