Security Analysts and Their Efficiency

Author

Kathleen Young Poniewaz, Fontbonne College

Year of Award

1992

Degree

Master of Business Administration (MBA)

College

College of Business & Professional Studies

Degree Program

Business Administration

Department

Business Administration

Keywords

investment, stock, returns, capital, research

Abstract

The role of the financial analyst in the investment process is quite broad, The analyst performs an important function as a conduit that translates information for the stock market. There has been much disagreement in this area as to whether there is economically valuable information in analysts’ buy/sell recommendations. My thesis will explore the economic effectiveness of security analysts and attempt to provide justification that analysts provide a valuable information processing service* to the vast majority of active stock market investors.

Terms devised to describe the volatility of the market in an attempt to explain reversals and upswings include; anomalies, effect theories and more classic terms such as market efficiency and capital asset pricing models. Analysts tend to disagree with most academic theories because they believe other factors influence earnings forecasts and that it is never possible to have all information available. Analysts tend to rely on the behavior decision making research theories since they take into consideration psychological factors that influence investor's decisions. However, analysts are consistently poor at their profession according to many sources and investors could simply 'beat the market' by throwing darts randomly to select stocks.

Evidence to support the thesis will include a discussion of stock valuation theories such as the Capital Asset Pricing Model, Arbitrage Pricing Theory and market efficiency theories. The thesis will also focus discussion on the forecasting ability of security analysts. The thesis will then focus on one firm's stock recommendations after discussion of the current economy and numerous statistics generated to date. These statistics will include election year statistics, Standard & Poor's industry group performance, and the effect a single new accounting standard could have on earnings forecasts.

The final chapter of the thesis will discuss the efficiency of stock selection and reliability of security analysts recommendations in the real world. This data will contribute and support the conclusion that analysts provide an economically justifiable role.

Document Type

Restricted Thesis

Recommended Citation

Poniewaz, Kathleen Young, "Security Analysts and Their Efficiency" (1992). All Theses, Dissertations, and Capstone Projects. 349.
https://griffinshare.fontbonne.edu/all-etds/349