Over on A Dash of Insight, Jeffrey Miller provides a comprehensive overview of how an upgrade or downgrade by a "Big Firm" analyst can have an immediate impact on the price of a stock. Wall Street research may be flawed, but the fact remains that an up or down signal from a highly-paid Wall Street analyst still matters:

"Stocks still make big moves on analyst downgrades (or upgrades).  The volume is pretty strong.  This suggests one of the following situations:

Institutional investors are reacting to the sell-side research;

Individual investors are reacting to the news; or

Traders are trying to beat everyone to some new play.

Whatever the source, one cannot question the impact.  There is an immediate effect from a downgrade (or upgrade) by a big-name firm.  The news reports often do not mention the analyst's name.  It is enough that "Big Firm" chose to employ the analyst."

With that as an overview, A Dash of Insight also links to a number of informational resources and analysis for understanding, interpreting and perhaps even profiting from analyst reports.

In some cases,  the actual rating is not so important as the type of information found within the reports. In other cases, the mere fact that a stock is overlooked by analysts can be a signal to buy or sell.

[image: iPhone Thumbs Up and Thumbs Down by Stephane Delbecque]