The Effects of Changes in the Target Stock Price of Analyst and Trading Behavior by Investor Types

This study is to investigate the stock price effects of analysts’reports on the target stock prices and trading behavior by investor types. Out of 140,360 analysts’ reports published from 2014 to 2018 ? excluding reports on financial institutions ? 23,848 reports of target prices changes were taken for the investigation. Using the event study method, we measured cumulative abnormal returns from ?250 days to +250 days around the revision announcement date.
Furthermore, the study also includes analysis on impacts of trading behavior by investor types.
The results are summarized as follows :
First, when analysts revised their target stock price upward(downward), stock prices increased(decreased) significantly. so the upward(downward) revisions positively(negatively) affected stock prices.
Second, in the case of upward revisions of target stock prices, there is larger impact in KOSDAQ market than KOSPI market. when analysts revised target stock prices downward, there is no substantial difference between KOSPI market and KOSDAQ market.
Third, when analysts revised target stock prices upward(downward), stock prices continued to rise(fall) starting from ?40 days from the announcement date. After the event date, however, stock prices continued to fall even if analysts revised target stock prices upward. this result appears to imply that the information had been already reflected on stock prices before the announcement was made, which means that there might have been an information leakage. Or the stock market is efficient in that there is no information effect around the announcement date, and analysts’reports are published late after the stock price changes.
Fourth, foreign investors and institutional investors are net buyers while individual investors are net sellers of those stocks prior to the announcement date. After the event date, foreign investors and institutional investors are net sellers while individual investors are net buyers.