Stock Recommendations in Swedish Printed Media: Leading or Misleading?

Abstract

This paper analyzes the initiated and changed recommendations published in six well-known Swedish newspapers and business magazines for the period 1996-2000 using a buy-and-hold abnormal returns (BHARs) approach. The results distinguish between recommendations from analysts and journalists. Buy recommendations were misleading investors, whereas sell recommendations were leading them, overall yielding returns in line with the market. This asymmetry is due to positive information from the management of the company being more intricate to interpret than negative. The information provided by management is generally positively biased, both for good and bad information. This phenomenon holds for recommendations from both analysts and journalists. Following buy- and sell recommendations from analysts yielded BHARs in line with the BHARs from following journalist recommendations, which in turn give rise to returns in line with the market.