Market Reactions to Stock Recommendations in Business Media: An Event Study on Publications by Börsplus

Abstract: The aim of this thesis was to further the understanding of how business media affects stock markets. That was achieved by studying market reactions to the publication of stock recommendations by Börsplus on the Swedish stock market during the minutes and days following the publication of the recommendations. The sample consisted of stock recommendations by Börsplus published during the time period 2015-2019. By employing a traditional event study methodology, it was shown that buy and sell recommendations were associated with positive and negative abnormal returns during the trading days around the publication day and that the cumulative abnormal returns did not reverse during the 20 trading days following the publication. Furthermore, it was shown that buy, hold, and sell recommendations were associated with abnormal trading volumes during the trading days surrounding the publication. By employing an intraday event study methodology, it was also shown that there was an initial reaction to buy recommendations consisting of cumulative returns of 1.22% that occurred immediately after the publication and lasted for roughly 30 minutes. The reaction to sell recommendations was larger in magnitude but more gradual. Hold recommendations were not associated with any immediate stock price reaction. The findings are interpreted as being consistent with the information hypothesis, that the information contained in the stock recommendations was relevant for the valuation of the recommended stock and had not been incorporated into stock prices prior to publication, and that it is unlikely that the findings are driven by confounding events.