Financial Analysis Question
Inverse correlation of downgrades and stock price
Why does it sometimes appear that there's an inverse correlation between a downgrade and the stock price? (A couple of today's examples: Deutsche Securities downgraded American Axle (AXL) from Buy to Hold. Oppenheimer downgraded FormFactor (FORM) from Outperform to Perform. Piper Jaffray downgraded Washington Mutual (WM) from Neutral to Sell.)
Best Answer
206 points
DirtyD answered 3 months ago …
There are always other factors to consider:
1. overall momentum of the market
2. overall momentum of a sector
3. people realizing that some analysts suck and it's ok to bet against them
4. people covering previous shorts if the stock has already come down a bit
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