Newsmakers

Analysts recommend: Look closely and learn more

Finance Professor Roni Michaely’s ongoing research on the hidden meaning of analysts’ stock recommendations, presented in a working paper with co-authors Ambrus Kecskés and Kent Womack, was covered by columnist Jack Hough in the Wall Street Journal (Jan. 14) under the headline “How to profit from analysts’ stock recommendations.” Hough’s weekly “Upside” column focuses on investment bargains.

“The three authors theorize that the best recommendation changes are ones that stem from concrete new information, and that changes in near-term earnings forecasts are a good sign of such information,” Hough writes. “In the study, they find that stock prices drift much more when recommendation changes are accompanied by earnings forecast revisions.”