Are Analysts Really Optimistic in Their Stock Recommendations? The Case of the Polish Capital Market

This paper examines the relation between the quality of forecasts and the types of analysts' stock recommendations. Using hand-collected data on stock recommendations issued for companies listed on the Warsaw Stock Exchange (WSE) in the period 2005–2012, we find that, despite analysts' clear tendency to issue positive stock recommendations, this tendency generally does not affect the quality of their forecasts in all types of stock recommendations. The accuracy of forecasts, however, decreases as the complexity of the forecasted items (revenue, EBIT, net income, and FCF) increases. We also find no clear difference in the level of analysts' optimism (pessimism) in their forecasts between different types of stock recommendations, but analysts' optimism is visible in the size of their forecasts' overestimation. The findings can help in assessing the value of the stock recommendation on the WSE