The Value of Client Access to Analyst Recommendations
نویسنده
چکیده
Early access to stock recommendations provides brokerage firm clients with incremental investment value. After controlling for transaction costs, purchasing (selling) quickly following upgrades (downgrades) results in average two-day returns of 1.02% (1.50%). Short-term profit opportunities persist for two hours following the pre-market release of new recommendations. The results are robust within sub-periods and a calendar-based strategy produces positive abnormal daily returns of over 10 basis points, or roughly 30% annualized. Recommending firms’ market makers shift their quotes accordingly, providing indirect evidence that clients make use of the informational advantage that arises from analysts’ opinion changes.
منابع مشابه
Is Analyst Output Informative? An Intraday Study of Analyst Comments
Conventional wisdom suggests that the public release of financial analyst output is informative to traders about firm value. However, empirical tests of this mechanism have encountered difficulties in isolating the release of analyst output from concurrent intervening events such as analysts’ private-client communications. Earnings conference calls provide a unique opportunity to overcome this ...
متن کاملThe Client Is King: Do Mutual Fund Relationships Bias Analyst Recommendations
This paper investigates whether the business relations between mutual funds and brokerage firms influence sell-side analyst recommendations. Using a unique data set that discloses brokerage firms’ commission income derived from each mutual fund client as well as the share holdings of these mutual funds, we find that an analyst’s recommendation on a stock relative to consensus is significantly h...
متن کاملInvestment Banking and Analyst Objectivity: Evidence from Forecasts and Recommendations of Analysts Affiliated with M&A Advisors
Previous research finds some evidence that analysts affiliated with equity underwriters issue more optimistic earnings growth forecasts and optimistic recommendations of client stock than unaffiliated analysts. Unfortunately, these studies are unable to discriminate between three competing hypotheses for the apparent optimism. Under the bribery hypothesis, underwriting clients, with the promise...
متن کاملAnalyst Recommendations and Mergers: Do Analysts Matter?‡
This paper investigates the relation between investment analyst recommendations and merger completion. Unlike the new issues market, we argue analysts’ incentives are skewed to issue recommendations that ensure merger completion rather than maximize the overall deal value. Using a comprehensive sample of completed and withdrawn mergers, we observe the direction and affiliation of recommendation...
متن کاملA Genetic Programming-based trust model for P2P Networks
Abstract— Peer-to-Peer ( P2P ) systems have been the center of attention in recent years due to their advantage . Since each node in such networks can act both as a service provider and as a client , they are subject to different attacks . Therefore it is vital to manage confidence for these vulnerable environments in order to eliminate unsafe peers . This paper investigates the use of genetic ...
متن کامل