Abstract
This study aims to examine the information content in the stock recommendation from security firms. Targeting at 12 listed financial companies in CMoney’s data base ranged from 2008 to 2017, event study was used to analyze the reaction of the stock prices before and after the announcement of stock recommendation, and further examine if the changes in the stock prices generates significant abnormal returns. The result shows that positive recommendation from security firms was a more valuable reference than negative recommendation, and recommendation from foreign security firms was more valuable than form domestic security firms. Furthermore, downgrades recommendation from foreign security firms was more valuable than upgrades recommendation. In addition, the announcement effect usually took place on the event day and the 2 days after it, but it continued until the fifth day when foreign security firms announced downgrades recommendation. This implies that disposal effect exists in Taiwan’s stock market. In conclusion, the empirical test shows similar results with previous studies, indicating that stock recommendation from security firms still has an influence despite the fact that financial stocks have higher information transparency. It also indicates that market participants are not only interested in the information from security firms’ report, but also care more about the stock recommendation from it.