Market Responses to Analysts� Recommendations and Information Weighting
Sang Koo Kang․Joonghyuk Kim

� Abstract �

We examine if the market responds differently to analysts� stock recommendations when
analysts put different weights on private information. Consistent with previous studies, we
find that, on average, analysts tend to put larger than efficient weights on private
information. We show that the market response to analysts� recommendations is greater
when they are made by analysts who put moderate weight on private information than
when they are made by those who put over or underweight on private information. We
also find that analysts who put moderate weight on private information provide the most
accurate earnings forecasts. These results imply that investors value the private information
released to the market through analysts� recommendations and that the investment value
of analyst recommendations, if any, results from both their ability to access private information
and their ability to process and interpret publicly available information.

Keywords : Analyst Stock Recommendations, Market Reactions, Information
Weighting, Private Information
JEL Classification Number : G14, G24, J44