Download This Article

Enrico Maria Cervellati ORCID logo, Antonio Carlo Francesco Della Bina ORCID logo, Pierpaolo Pattitoni ORCID logo


Financial analysts’ research activity seems to be important for investors in their investment decisions. Understanding if financial analysts’ reports can influence the market and the degree of reliability of their forecasts has been a theme lively debated in the academic literature but also in the press, mainly because of recent financial scandals. The main objective of the paper is to calculate the investment value of financial analysts’ recommendations on companies listed in the Italian Stock Exchange and to verify the possibility of profiting from relying on the average consensus of recommendations. We have enclosed in the analysis all the 16,634 reports issued between the 1st January 1999 and the 23rd July 2004 and available on the website of the Italian Stock Exchange, constructing a unique database for Italy. After classifying companies by quarter, five portfolios are formed based on analysts’ average consensus to calculate the excess returns of each portfolio in each quarter. Our results suggest that analysts’ recommendations have indeed investment value, even if investors should carefully consider neutral recommendations that can be considered as negative ones. These results, furthermore, give some interesting regulatory suggestions for a policy maker that wants to ensure transparency in the markets.

Keywords: Stock Market, Information, Investments

How to cite this paper: Cervellati, E. M., Della Bina, A. C. F., & Pattitoni, P. (2007). Investment value of recommendations in the Italian stock exchange. [Special Issue]. Corporate Ownership & Control, 4(4-4), 78-91.