Why Analyst's opinions matter?

Discussion in 'Trading' started by zenith, Jun 1, 2005.

  1. zenith


    I'm new to investing/trading and I'm trying to understand analyst's influence on the stocks. Why their upgrades/downgrades matter so much? Is it because Institutions read and follow their recommendations? Or is it for retail investor like me? I always thought that Institutions move the stocks and trying to understand who do they listen to. Any comments?

    Also, if Institutions do follow it, do they get reports and upgrades/downgrades before us or at the same day.
  2. Big time. No matter how wrong and stupid the recommendations are, many funds (particularly pension funds) just blindly follow the I-Bank recommendations. Don't matter to them, they make their fee regardless.
    Some average investors also like to follow the upgrades/downgrades. Also, when it actually had a real effect, whenever an I-bank did a key upgrade/downgrade, all the brokers of that house would get on the phones and "notify" the clients.
  3. Hi Zenith:

    There are a great number of analysts working for quite a few institutions. Used to be that the analysts would provide their opinions only to their own in-house investment groups. Eventually they saw this (offering an opinion) as a way to entice customers to bring (institutional) accounts to them, and further down the road they began to use this analysis as a way to promote business to the world of the retail investor. As you can imagine, there are skilled analysts and those who are "less skilled". You may want to check out "Starmine" (google it). They rate analysts by the correctness of their calls. If you like to follow this analysis, you can eventually get an idea of who the best (most accurate) analysts are for each industry group.

    Good luck,