On the investment value of sell-side analyst recommendation revisions in the UK

Chen Su*, Hanxiong Zhang, Kenbata Bangassa, Nathan Lael Joseph

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


This study conducts a comprehensive investigation into the investment value of sell-side analyst recommendation revisions in the UK, using a unique dataset from 1995 to 2013. Our rolling window analysis shows that, on average, upgrades fail to generate any significantly positive abnormal returns in any period of time, even before transaction costs. In addition, although downgrades could generate significantly negative abnormal gross returns over some periods of time, these observed significant returns disappear after accounting for transaction costs. Overall, our bootstrapping simulations confirm sell-side analysts’ lack of skill in making valuable up/downward revisions to cover the size of transaction costs, irrespective of whether these revisions are made by high-ranking brokerage houses or not. However, an industry-based analysis shows that, within two high-tech industry sectors, i.e., Health Care and Technology sectors, sell-side analysts possess certain skill in making valuable downgrades over some periods of time and, in particular, such skill is sufficient to offset transaction costs.

Original languageEnglish
Pages (from-to)257–293
Number of pages37
JournalReview of quantitative finance and accounting
Issue number1
Early online date9 Aug 2018
Publication statusPublished - 15 Jul 2019

Bibliographical note

© The Author(s) 2018. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.


  • Analyst recommendation revisions
  • Bootstrapping simulations
  • High-ranking brokerage houses
  • Industry
  • Transaction costs


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