Define: Consensus Recommendation

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Definition: Consensus Recommendation



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Full Definition of Consensus Recommendation


The consensus recommendation is an average of analyst ratings on a stock. Suppose five security analysts follow Acme stock; two say “buy”, one says “hold”; two say “sell”. To compute a consensus recommendation, each rating is assigned a value, e.g., a buy is a 5; a hold, 3; a sell, 1. The consensus recommendation is the average rating, weighted by a number of analysts: [(2 X 5)+(1 X 3)+(2 X1)]/5. Thus the consensus recommendation is a 3, or hold. Like any weighted average, the consensus recommendation has its pluses and minuses. The consensus recommendation does give you a quick idea of what Wall Street pros think of the stock. But the consensus recommendation can also conceal wide differences of opinion among analysts: in the example, note that the consensus recommendation (hold) was the rating of the fewest analysts. In addition, the methodology of a consensus recommendation is open to scrutiny. For example, it’s questionable whether the ratings of the best analysts should receive the same weight as those of analysts held in less esteem.


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https://payrollheaven.com/define/consensus-recommendation/
Modern Language Association (MLA):
Consensus Recommendation. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. April 09, 2020 https://payrollheaven.com/define/consensus-recommendation/.
Chicago Manual of Style (CMS):
Consensus Recommendation. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/consensus-recommendation/ (accessed: April 09, 2020).
American Psychological Association (APA):
Consensus Recommendation. PayrollHeaven.com. Retrieved April 09, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/consensus-recommendation/

Definition Sources


Definitions for Consensus Recommendation are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 4th February, 2020