Capitalizing on Equity Analyst Factors During Different Volatility Regime Periods

Abstract

Examining abnormal returns associated with analyst earnings estimate, price target, and recommendation announcements, I extend prior work to determine whether investors can still capitalize on analyst factors. Although all are significant when considered independently, when considered simultaneously, the significance of both the earnings estimate and price target factors are diminished or eliminated. In addition, when considered simultaneously during abnormal volatility regime periods only, recommendations remain consistently significant immediately following the event date. In a one-month period, the least favorable signals for all factors exhibit higher than expected abnormal returns.

TOPICS: Security analysis and valuation, portfolio management/multi-asset allocation