This study investigates the impact of analyst recommendations on stock performance, comparing star-ranked analysts (StarMine rankings) to non-stars. Using a buy-and-hold calendar-time portfolio methodology, the study finds that all analyst groups generate abnormal returns exceeding market averages. Star analysts outperform non-stars in short-term portfolios (0.5523% monthly alpha), but not in long-term portfolios. Further analysis using GARCH and frequency-domain causality tests (with NASDAQ as a sentiment proxy) reveals a statistically significant positive effect of investor sentiment on stock return volatility, with changes occurring within 5-10 days. The study validates StarMine's ranking effectiveness and suggests investors can benefit from incorporating analyst recommendations, particularly in short-term strategies.

Darko B. Vukovic, Orifjon O. U. Kurbonov, Moinak Maiti, Mustafa Özer, Milan Radovanovic