Positive Recommendations and Abnormal Returns on the Warsaw Stock Exchange in 2005–2006

The primary goal of the research was to determine the extent of the impact of positive ("buy" and "accumulate") recommendations issued by specialized institutions for companies listed on the Warsaw Stock Exchange on excess returns. The project was inspired by H. Gurgul's work, who, inter alia, examined the influence of “buy” recommendations on abnormal returns realized by investors from July 1995 to September 2003. The presented research covers the period from January 2005 to December 2006. The analysis was carried out using the event studies methodology. Abnormal returns were estimated using the market model. H. Gurgul's analysis proves that positive recommendations are not statistically significant in terms of their influence on stock prices, so for excess returns on investments in stocks covered by recommendations. In contrast, the presented research shows that “buy” recommendations issued in 2005 - 2006 led to statistically significant abnormal returns. This phenomenon is clearly visible on the day on which a recommendation is disclosed to commercial customers. The analysis on a sample of 150 “accumulate” recommendations indicates that such recommendations have no impact on excess returns