Stock Market Recommendations: Does it Help Investors?

Abstract

The brokerage firms and financial institutions recommend for buying and selling shares throughout the year. The objective of the paper is to investigate whether there is any scope to earn higher return than the market on the basis of recommendation offered. This paper has considered one eighty five recommendations from twenty firms spreading over a period from November 2005 to February 2007. The investment horizons of these recommendations have been taken as three months and six months. The return analysis of all recommendations for the whole period and in four different sub-periods has been determined. The analysis of beta suggests that average return from recommendation is lower than market return. The risk adjusted returns yielded by recommendation of different firms have been determined on the basis of Sharpe ratio, Trenor ratio, Jensen measure and finally Sortino ratio. It was observed from the analysis that the stock market recommendations might help the investor selectively.