Finanse, Rynki Finansowe, Ubezpieczenia

Purpose – The paper discusses the long-term price reaction of investors to recommendations issued by the largest brokerage houses. Design/Methodology/approach – The study used a broad sample of over 17,000 different types of recommendations issued during 1998-2013 for 436 companies listed on the Warsaw Stock Exchange. The price reaction was analysed for different types of recommendations, recommendations’ characteristics and investor sentiment. Event study analysis was used with the application of average buy-and-hold abnormal returns (ABHAR). Findings – Negative long-term price reaction was observed both for the positive and negative recommendations. Only the very positive recommendations – especially those forecasting return of at least 50 percent – resulted in positive long-term abnormal returns. The capital market conditions seem to influence the reaction to recommendations. Originality/value – The importance of brokerage recommendations for investors inspired heated discussion among as well academics as practitioners. The advantage of this research is its scale and multidimensional approach to the empirical analysis for the Polish capital market.