Using a sample of Chinese security analysts’recommendations from 2005 to2010,we examine the source of analysts’superiority and the investment value of their recommendations.Using a calendar-time portfolio approach,we find that,on average,analysts’recommendations are valuable and that analysts are better at analyzing and transferring firm-specific information than market-wide or industry-level information.In addition,we show that the investment value of recommendations increases as firm-specific information becomes more important in stock pricing.Our empirical results are useful in guiding investors and helping brokerage houses to evaluate the output of research departments.
