The impact of analyst recommendations and revisions on the prices of JS']JSE-listed companies

This study establishes that equity analyst recommendations have a significant short-term impact on share prices, by utilising an international database containing 31 363 analyst recommendations on JSE-listed and delisted companies, published over the period 1995 to 2011. In addition, two portfolio strategies were constructed. The first strategy shows that only investing in stocks with the most favourable consensus recommendations is associated with significant abnormal returns. The second strategy demonstrates that a portfolio consisting of recently upgraded stocks earns positive abnormal returns while a portfolio consisting of downgraded stocks is associated with negative abnormal returns.