Devin Shanthikumar

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Why do security analysts issue overly positive recommendations? We propose a novel approach to distinguish strategic motives (e.g., generating small-investor purchases and pleasing management) from nonstrategic motives (genuine overoptimism). We argue that nonstrategic distorters tend to issue both positive recommendations and optimistic forecasts, while(More)
Security analysts tend to bias stock recommendations upwards, particularly if they are affiliated with the underwriter. We analyze whether and why investors fail to account for such distortions. Using the NYSE Trades and Quotations database, we find that large traders correct for the upward bias and exert positive abnormal trade reaction to strong buy(More)
Traditional economic analysis of markets with asymmetric information assumes that the uninformed agents account for the incentives of the informed agents to distort information. We analyze whether investors in the stock market internalize such incentives in practice. Security analysts provide investors with information about investment opportunities by(More)
We test the hypotheses that (i) poor accounting quality is associated with delayed stock price adjustment to information, and (ii) investors require higher future stock returns for the price delay associated with poor accounting quality. We define accounting quality as the precision with which financial reporting informs equity investors about future cash(More)
We examine the selection and performance of stocks recommended by analysts at a large investment firm relative to those of sell-side analysts during the period mid-1997 and 2004. The buy-side firm’s analysts issued less optimistic recommendations for stocks with larger market capitalizations and lower return volatility than their sell-side peers, consistent(More)
Traditional economic analysis of markets with asymmetric information assumes that the uninformed agents account for incentives of the informed agents to distort information. We analyze whether investors in the stock market are able to account for such incentive distortions. Security analysts provide investors with information about investment opportunities(More)