Analyst Recommendations and Anomalies Across the Globe

We reexamine the value of analyst recommendations using a dataset of 45 countries, 3.8 million firm-month observations, and more than 200 return anomalies from 1994 to 2019. We find that analyst recommendations lead to highly significant (insignificant) abnormal returns in international markets (in the U.S.). In contrast to recent U.S.-based evidence, analysts do not seem to contribute to mispricing in international markets, as they tend to give more favorable recommendations to (anomaly-ranked) underpriced stocks, and inconsistencies between recommendations and composite anomaly ranks lead to lower, not higher, abnormal returns. Recommendations are more valuable in less developed and in less individualistic markets and during low sentiment periods. Our results support limits-to-arbitrage and behavioral explanations of global stock market inefficiencies.