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AbstractWe examine the rationales provided when sell‐side analysts change investment recommendations. Although most changes in investment advice cite company fundamentals, analysts justify one in eight recommendation changes solely on the basis of price movements. Although markets react to price‐basis recommendations, these reactions are smaller and less prolonged than to recommendations citing company fundamentals, consistent with investors' giving more weight to recommendations conveying fundamental information. Our results also suggest that sell‐side analysts' incentives are tilted against downgrades. Price responses to downgrades are more pronounced than to upgrades, even controlling for the rationale. Moreover, the language justifying an upgrade is more likely to cite a general change in business prospects. In contrast, downgrades are more likely accompanied by an explicit reduction in the analyst's earnings forecast.JEL classification: G24, G14, G12.