Analyzing the Analysts: When do Recommendations Add Value? (.pdf)

This one is a must for any investment class! Jegadeesh, Kim, Krische, and Lee provide a fascinating look at investment analysts. They study stock analyst recommendations. Some of their findings are that analysts tend to prefer glamour stocks (higher growth and with momentum), and firms with whom the analyst’s firm has an investment banking relationship. Additionally, changes in analyst recommendations tend … [ Read more ]

Risks For the Long Run: A Potential Resolution of Asset Pricing Puzzles

That the volatility of the equity risk premium and the risk-free rate are larger than most models predict has long been known and discussed (for example the seminal Mehra and Prescott 1985 paper). Bansal and Yahon try their hands at explaining why this puzzle exists (their paper will appear in an upcoming Journal of Finance (JF)). They model the “consumption and dividend … [ Read more ]

The Price Response to S&P 500 Index Additions and Deletions: Evidence of Asymmetry and a New Explanation (.pdf)

Chen, Noronha, and Singal report in a forthcoming JF article that when stocks are dropped from the S&P 500, there is a temporary price decline. However when firms are added, the increase is seemingly permanent. This asymmetry is seemingly counter to most widely held views that demand curves for individual stocks are elastic. The authors suggest that this asymmetry is due to … [ Read more ]