We find that analysts who issue more accurate earnings forecasts also issue more profitable stock recommendations. The average factor-adjusted return associated with the recommendations of analysts in the highest accuracy quintile exceeds the return for analysts in the lowest accuracy quintile...

The active share of mutual funds drops significantly when investor sentiment is high, indicating that fund managers reduce their active stock selection and stay closer to their benchmarks during such periods. Our evidence is consistent with fund managers being sentiment-prone—challenging the...

In bad times, uncertainty is high, so that investors find it more difficult to assess the prospects of the firms they invest in. Learning models suggest that in such times investors should, everything else equal, value informative signals such as analyst forecasts and recommendations more than...