Asset pricing models generate predictions relating assets’ expected rates of return and their risk attributes. Most tests of these models have employed realized rates of return as a proxy for expected return. We use analysts’ expected rates of return to examine the relation between these...

"We show that abnormal returns to analysts' recommendations stem from both the ratings levels assigned and the changes in those ratings. Conditional on the ratings change, buy and strong buy recommendations have greater returns than do holds, sells, and strong sells. Conditional on the ratings...