Real Diagnosis Demonstrational Analysis Of Security Analysts Recommendation Based On Reputation Perspective

The question about doing securities analysts’ the stock recommendations bring excess returns to investors, which has long been deba-ted by financial researchers and practitioners. And our stock marketstarted late, the early development of the Securities analyst industry werevery irregular, Chinese scholars study on this issue deeply in the pastdecade or so.We find thousands of research reports from the dozens of securitiescompanies during November2010to August2011, and use eventstudy methodology to reach empirical evidence. The results show therating recommendations of China’s securities analysts can bring theexcess returns to investors in general, and after the release of therating of the listed companies, the stock price is trend to the samedirection about the rating of the listed companies, but the results arenot very significant in statistically. And we study that doing differentreputation can bring different excess returns to investors. The resultsshow that the ratings of the high reputation of the securities analystsis more accurate than the lows, in other words, the high reputationof the securities analysts’ stock rating recommendations can bringmore excessive returns. If investors want to get more using earningsthan the market earnings, they should buy the stocks which havestrongly recommended from the highest reputation of the securities analysts, and sell the stocks which have a neutral rating (3level)from the high reputation of the securities analysts.The contents of this paper are very important for investors, theinvestment community, academia and regulators. For investors, theyshould use the research reports of the securities analysts in rationally.The investors should see the reason why the securities analysts givedifferent ratings to the listed companies, and investors can judge themarket environment by themselves, it could make the investors getexcess returns. It is very important to enhance the research abilitiesfor the securities analysts. Finally, the regulators should protect theinterests of investors, especially the small and medium investors’interests.