The Stock Selection and Performance of Buy-Side Analysts

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The Stock Selection and Performance of Buy-Side Analysts

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dc.contributor.author Groysberg, Boris
dc.contributor.author Healy, Paul M.
dc.contributor.author Serafeim, Georgios
dc.contributor.author Shanthikumar, Devin
dc.date.accessioned 2012-11-09T15:32:19Z
dc.date.issued 2012-11-09
dc.identifier.citation Groysberg, Boris, Paul M. Healy, George Serafeim, and Devin M. Shanthikumar. "The Stock Selection and Performance of Buy-Side Analysts." Management Science (forthcoming). en_US
dc.identifier.issn 0025-1909 en_US
dc.identifier.uri http://nrs.harvard.edu/urn-3:HUL.InstRepos:9887634
dc.description.abstract Prior research on equity analysts focuses almost exclusively on those employed by sell-side investment banks and brokerage houses. Yet investment firms undertake their own buy-side research, and their analysts face different stock selection and recommendation incentives than their sell-side peers. We examine the selection and performance of stocks recommended by analysts at a large investment firm relative to those of sell-side analysts from mid-1997 to 2004. We find that the buy-side firm's analysts issue less optimistic recommendations for stocks with larger market capitalizations and lower return volatility than their sell-side peers, consistent with their facing fewer conflicts of interest and having a preference for liquid stocks. Tests with no controls for these effects indicate that annualized buy-side Strong Buy/Buy recommendations underperform those for sell-side peers by 5.9% using market-adjusted returns and by 3.8% using four-factor model abnormal returns. However, these findings are driven by differences in the stocks recommended and their market capitalization. After controlling for these selection effects, we find no difference in the performance of the buy- and sell-side analysts' Strong Buy/Buy recommendations. en_US
dc.language.iso en_US en_US
dc.relation.hasversion http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1644782 en_US
dash.license OAP
dc.subject analysts en_US
dc.subject investment recommendations en_US
dc.subject buy-side analysts en_US
dc.subject sell-side analysts en_US
dc.subject conflicts of interest en_US
dc.subject financial markets
dc.subject financial institutions
dc.subject recommendation optimism
dc.subject recommendation performance
dc.subject United States
dc.subject financial services industry
dc.subject stock recommendations
dc.title The Stock Selection and Performance of Buy-Side Analysts en_US
dc.type Journal Article en_US
dc.description.version Author's Original en_US
dc.relation.journal Management Science en_US
dash.depositing.author Groysberg, Boris
dc.date.available 2012-11-09T15:32:19Z

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