“No response” Instead of stock recommendations: Evidence from Korea

Abstract

The objectives of this study are to confirm the theories and findings of empirical research related to stock recommendations in analysts’ reports and to examine from various angles the significance of stock recommendation revisions in the Korean capital market. In a considerable number of analysts’ reports, no stock recommendations are made; this area of the report remains blank. In this study, the blank is labeled “No Response”. We analyze the factors related to the decision to omit stock recommendations and the informational content of analysts’ reports in which no stock recommendations are made. There is no previous research on this phenomenon in Korea or other countries. Under the assumptions that the optimum portfolio of investors is affected by the trading of stocks, and that analysts’ reports reflect market expectations, we investigate the informational content of reports in which no stock recommendations are made by observing the abnormal returns on the day of disclosure.