Effect of analysts’ recommendations on stock prices in Market for Alternative Investment (MAI)

Abstract

     Analysts’ recommendations in the market for alternative investment (MAI) have value for investors. Stock prices responded to Buy recommendations on the revealed dates, yielding a significant 0.96 percent on the average return, and significantly accumulating to 1.45 percent until the third working day. The average return of recommendation to Sell was negative since the publication date (-1.18%) and accumulated to -10.90 percent after 7 working days. Recommendations to Hold had no impact on the stock price on the event date but after that, the average cumulative return was significantly negative. This article used the Event study method and the Market model to measure the effect of an event on stock price change. For SET50 stocks, the value of the analyst’s recommendation also existed but stock prices reacted to Hold and Sell recommendations over a longer period than in the MAI. Investors responded to Buy recommendations 2 days after the publication date. Furthermore, recommendations on small sizes of stocks in both markets were found to have no value for investors.