Equity Analyst Recommendations: A Case for Affirmative Disclosure?
Article first published online: 6 FEB 2014
Copyright 2014 by The American Council on Consumer Interests
Journal of Consumer Affairs
Special Issue: The New Era in Consumer Protection Regulation
Volume 48, Issue 1, pages 96–123, Spring 2014
How to Cite
BAKER, W. and DUMONT, G. (2014), Equity Analyst Recommendations: A Case for Affirmative Disclosure?. Journal of Consumer Affairs, 48: 96–123. doi: 10.1111/joca.12030
- Issue published online: 27 MAR 2014
- Article first published online: 6 FEB 2014
- Manuscript Accepted: 23 NOV 2013
- Manuscript Revised: 14 NOV 2013
- Manuscript Received: 27 NOV 2012
The financial well-being of retail investors is impacted by the quality of their investment decisions. Inaccurate or misleading financial information that is misconstrued by investors to be reliable can compromise decision making. This research reports on the results of three studies that show despite the fact that equities with “buy” ratings significantly underperform equities with “hold” ratings, retail investors rely on them when making investment decisions. It also shows analysts' guidance remains inaccurate in the aggregate despite the passage of Sarbanes-Oxley and related legislation/regulation. This article begins a conversation on the implications of this dilemma, specifically the value of affirmative disclosure as a remedy.