Prophets during boom and gloom downunder

It has become more apparent in recent years that equity analysts come under much internal and external pressure that is likely to dilute the value of their forecasts and recommendations. In this paper we find, similar to Jegadeesh et al. (Jegadeesh, N., Kim, J., Krische, S., Lee, C., 2004, Analyzing the Analysts: When Do Recommendations Add Value? Journal of Finance 59, 1083-1124.), that Australian analysts consistently favour large high momentum growth stocks and that their recommendations, if anything, have negative value with the exception of those made in relation to low momentum growth stocks. However, we do find evidence to suggest that changes in the analysts' recommendations could provide a useful input into one's investment decisions. When we divided our sample up into the growth market of the late 1990s and the falling market of the early 2000s, we find that analysts were moving their recommendations (even) more towards high momentum growth stocks during the boom years but in the opposite direction during the gloom years.