Short-Term Institutions, Analyst Recommendations, and Mispricing: The Role of Higher Order Beliefs

• 成果类型: Article
• 署名作者: Cremers, Martijn; Pareek, Ankur; Sautner, Zacharias
• 署名单位: University of Notre Dame; Nevada System of Higher Education (NSHE); University of Nevada Las Vegas; Frankfurt School Finance & Management
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12352
• 发表日期: 2021
• 页码: 911-958
• 关键词: INVESTOR SOPHISTICATION; stock recommendations; earnings; returns; INFORMATION; prices; MARKET; RISK

摘要

We document that stocks that have optimistic (pessimistic) consensus recommendations and are currently held by many short-term institutions exhibit large stock-return reversals: Their large past outperformance (underperformance) is followed by large negative (positive) future alphas. The predictable return reversals originate from overreaction to past recommendation releases and the correction of these overreactions around future releases. Results are stronger when earnings news is released and at firms with higher fundamental uncertainty. Further, firms with more short-term institutions show stronger announcement returns and price drift after recommendation changes. Our results are consistent with models of higher order beliefs where short-term institutions coordinate trading around public signals.