Impact of Analysts’ Recommendations on Market Liquidity and Volatility: A Study in Context of FAs on TV

Description

Page: 533-540

Ramphal¹ and Ravi Singla² (University Constituent College, Benra-Dhuri, Punjabi University, Patiala, Punjab¹ and University School of Applied Management, Punjabi University, Patiala, Punjab²)

This research examines how financial expert recommendations affect share liquidity and volatility. To achieve this goal, it covers recommended equity securities on the TV program “CNBC Awaaz Stock 20/20.” Based on financial analysts’ clean recommendations on 60 stocks, liquidity impact is computed using the total traded and total deliverable quantity approaches. The study applies the Yang and Zhang model to estimate the realized volatility due to its superior efficacy compared to peer models. The empirical evidence indicates a substantial rise in volatility and liquidity during and after the issuance of recommendations. The t-statistics for TTQ and TDQ percentage changes were statistically significant at the 5% level of significance on the day of the recommendation’s issuance and the day following the recommendation. The annualized values of Yang and Zhang’s realized volatility were 0.51 and 0.63, respectively, before and following the recommended days. This implies that the experts’ recommendations can assist investors in making significant gains from short-term share trading.