Analysts' optimistic stock ratings to decrease with new regulatory reform.
The article explores how the number of positive stock recommendations from analysts affects their decisions to downgrade or stop covering stocks. The researchers found that higher percentages of buy recommendations can lead to more downgrades and dropped coverage. Analysts tend to change their recommendations to hold rather than sell, especially after a regulatory reform. The market also pays more attention to analysts with more buy ratings. Overall, the study suggests that a specific rule has helped reduce overly optimistic stock ratings from analysts.