Value of analyst recommendations: International evidence

We evaluate the value of analysts' recommendations in the G7 countries. Stock prices react significantly to recommendation revisions in all countries except Italy. We find the largest price reactions around recommendation revisions and the largest post-revision price drift in the US. Neither differences in the timing of recommendation revisions relative to earnings announcements nor differences in industry coverage explain the superior performance of the US analysts' recommendations. Tests within a subsample of ADRs indicate that the most likely explanation for the superior performance is that the US analysts are more skilled at identifying mispriced stocks than their foreign counterparts.