Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70119
Authors: 
Hess, Dieter
Kreutzmann, Daniel
Pucker, Oliver
Year of Publication: 
2011
Series/Report no.: 
CFR Working Paper 10-17 [rev.]
Abstract: 
Analysts providing more accurate earnings forecasts also issue more profitable recommendations. We demonstrate how investors can profit from this contemporaneous link by differentiating between able and lucky analysts. In line with previous studies, we find that past track records alone are not sufficient to identify profitable recommendations. Only skilled analysts working in a superior environment provide consistently profitable recommendations. The overall profitability of their recommendations is not driven by a post-announcement drift effect. We find that an implementable, i.e. look-ahead bias free, trading strategy based on the projected - rather than past - earnings accuracy yields substantial excess returns.
Subjects: 
analysts
portfolio management
profitability of recommendations
JEL: 
G14
G17
G24
Document Type: 
Working Paper

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