The market reaction to financial analysts' stock recommendation revisions is examined in terms of magnitude and direction. It is found that market-adjusted stock returns are associated with the direction of stock recommendation revisions. For the stocks that receive downward stock recommendation revisions, the market-adjusted stock returns can also be explained by the magnitude of stock recommendation revisions, brokerage houses' publicity, firm size, firm age, New York Stock Exchange listing, and stock price momentum. The empirical evidence suggests that financial analysts' downward stock recommendation revisions provide superior information to investors than do upward stock recommendation revisions.
