The value of combining the information content of analyst recommendations and target prices

In assessing the usefulness of the analysts' stock picking advice, the extant literature has largely focused on the profitability of either their stock recommendations or target prices in isolation. In this paper, we examine the profitability of investment strategies that exploit the information analysts convey through revisions in both their stock recommendations and target prices. We find that these strategies significantly outperform the comparable strategies that make use of only one analyst output.