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Investor attention, analyst recommendation revisions, and stock prices

Welagedara, Venura, Deb, Saikat Sovan and Singh, Harminder 2016, Investor attention, analyst recommendation revisions, and stock prices, Pacific Basin finance journal, In press, pp. 1-13, doi: 10.1016/j.pacfin.2016.05.010.

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Title Investor attention, analyst recommendation revisions, and stock prices
Author(s) Welagedara, Venura
Deb, Saikat Sovan
Singh, Harminder
Journal name Pacific Basin finance journal
Season In press
Start page 1
End page 13
Total pages 13
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2016-05-26
ISSN 0927-538X
Keyword(s) Analyst recommendation
Price reaction
Investor attention
Summary We provide evidence that investors underreact after analysts' recommendation upgrades; however, price reactions are faster after downgrades. We measure individual investors' attention using Google's search volume index. Our findings indicate that, after upgrades, stocks that enjoy greater individual investors' attention underreact significantly more compared to stocks that receive high level of attention from institutional investors. On the other hand, after recommendation downgrades, stocks with higher levels of prior attention from individual investors overreact and show a significantly greater price reversal compared to stocks that received high level of attention from institutional investors. Our results suggest that attentive individual investors may not be rational; hence investor attention and investor sophistication are important for price discovery in the market.
Language eng
DOI 10.1016/j.pacfin.2016.05.010
Field of Research 150201 Finance
1502 Banking, Finance And Investment
1501 Accounting, Auditing And Accountability
Socio Economic Objective 900102 Investment Services (excl. Superannuation)
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2016, Elsevier B.V.
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Document type: Journal Article
Collections: Deakin Graduate School of Business
Department of Finance
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