Investors’ Reliance on Analysts’ Stock Recommendations and Mitigating Mechanisms for Potential Overreliance

@inproceedings{Kelly2012InvestorsRO,
  title={Investors’ Reliance on Analysts’ Stock Recommendations and Mitigating Mechanisms for Potential Overreliance},
  author={Khim Kelly and Bernardine Low and H. Tan and Seet-Koh Tan},
  year={2012}
}
We conduct three experiments to investigate whether and why investors rely on analysts’ stock recommendations, and how to mitigate potential overreliance. In Experiments 1 and 2, we find that investors who receive a buy (sell) recommendation judge a company to have higher (lower) investment potential, holding all other information constant. Warning investors about potential bias in recommendations and requiring them to form an independent stock recommendation reduce a buy recommendation’s… CONTINUE READING