I am just putting the final touches to a presentation I am giving at the AIA Conference on the Gold Coast next week and I have been looking in part at the inherent bias within recommendations by analysts. Fortunately, this topic is well covered in the literature and I have been able to pull together some bits and pieces into a dodgy table.
The data below shows the ratio of buy to sell recommendations over time. Interestingly the first bit of data I as able to find dated back to 1983 and it showed the ratio at just below parity. Coincidentally this low ratio of advisor buy recommendations was perfectly timed with the beginning of the 1980’s bull market. Who said analysts were not useful – well at least as a contrarian indicator. I have been able to find some unsupported data that this ratio has now blown out to 100 to 1 in recent years.