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How About Grading Broker Upgrades and Downgrades?

| | Posted in: Investing Expertise

A reader asked: “Have you ever graded the upgrades and downgrades of the major investment brokers, or perhaps the minor ones? These calls are clear and public and have a long track record. It should be fairly easy to determine whether simply buying (selling) when Goldman upgrades (downgrades) beats the market.”

There is a fairly extensive stream of academic research on this subject. See, for example:

“Combining Short Interest and Analyst Recommendations

“Analyst Ratings: Levels or Changes?”

“Aggregate Analyst Sentiment in the Long Run”

“Trust Me, It’s a Great Stock”

Searches of the Social Science Research Network (SSRN) may locate other relevant studies. The general demarcation in these studies is not specific brokers, but rather brokers who do and do not offer investment banking services.

Brokers issue thousands of upgrades/downgrades per year. Independent collection and analysis of this data is not presently practical for CXOadvisory.com. Note that a broker may discuss upgrades/downgrades with important clients (big traders) before announcing the decisions publicly.

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