Buy-Side Analysts, Sell-Side Analysts, and Investment Decisions of Money Managers

@article{Cheng2005BuySideAS,
  title={Buy-Side Analysts, Sell-Side Analysts, and Investment Decisions of Money Managers},
  author={Yingmei Cheng and Mark H. Liu and Jun Qian},
  journal={Journal of Financial and Quantitative Analysis},
  year={2005},
  volume={41},
  pages={51 - 83}
}
Abstract We examine the role of financial analysts in forming institutional investors' investment decisions. In our model, a fund manager invests in a stock based on the optimal weighting of reports created by a biased sell-side analyst and an unbiased buy-side analyst. The manager puts a higher weight on the buy-side analyst's report when the quality of the buyside analyst's information relative to that of the sell-side analyst increases, or when the sell-side analyst's degree of bias or… 

The Stock Selection and Performance of Buy-Side Analysts

It is found 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.

The Influence of Buy-Side Analysts on Mutual Fund Trading

We present evidence on the trading and performance impact of buy-side analysts. Using data provided by a large global asset manager, we relate buy-side analysts’ recommendations to fund transactions

A Study of Analyst-Run Mutual Funds: The Abilities and Roles of Buy-Side Analysts

We assess the abilities and the role of buy-side analysts within mutual fund families by analyzing mutual funds managed by buy-side analysts from fourteen fund families. Buy-side analysts exhibit

A comparison of buy-side and sell-side analysts

Buy-Side Analysts and Earnings Conference Calls

Companies’ earnings conference calls are perceived to be venues for sell-side equity analysts to ask management questions. In this study, we examine another important conference call participant —

Skin in the Game: The Inputs and Incentives that Shape Buy-Side Analysts' Stock Recommendations

Buy-side analysts play an important role in capital markets through their influence on institutional investment decisions, but they are rarely the subject of academic research. We survey 344 buy-side

The Investment Value of Contrarian Buy-Side Recommendations

We examine a comprehensive set of investment recommendations paired with analyst-specific information from over 1,000 buy-side analysts (predominantly analysts from hedge funds) from the private

Two Essays on Sell Side Equity Analysts

We contribute to the debate surrounding sell-side analyst skill in a novel way. In particular, we investigate whether analysts’ incorporate salient firm-level information in their recommendations or

When the Payment Mode Affects the Quality of Advices. Financial Analysts, Fund Managers, and Brokerage Commissions

"Sell-side"analysts advise fund managers with recommendations to buy or sell a stock. But being compensated with commissions proportional to the amount traded can drive the analyst to bias his
...

References

SHOWING 1-10 OF 51 REFERENCES

Affiliated Mutual Funds and Analyst Optimism

This paper extends the literature on analyst optimism. Our analysis of a large sample of recommendations issued from 1995 through 2006 indicates that sell-side analysts are likely to assign frequent

Do Brokerage Analysts' Recommendations Have Investment Value?

An analysis of new buy and sell recommendations of stocks by security analysts at major U.S. brokerage firms shows significant, systematic discrepancies between prerecommendation prices and eventual

Analysts' Conflict of Interest and Biases in Earnings Forecasts

Analysts' earnings forecasts are influenced by their desire to win investment banking clients. We hypothesize that the equity bull market of the 1990s, along with the boom in investment banking

The Relation between Analysts' Forecasts of Long-Term Earnings Growth and Stock Price Performance Following Equity Offerings

We evaluate the role of sell-side analysts' long-term earnings growth forecasts in the pricing of common equity offerings. We find that, in general, sell-side analysts' long-term growth forecasts are

Conflict of interest and the credibility of underwriter analyst recommendations

Brokerage analysts frequently comment on and sometimes recommend companies that their firms have recently taken public. We show that stocks that underwriter analysts recommend perform more poorly

The Anatomy of the Performance of Buy and Sell Recommendations

Brokerage house buy and sell recommendations influence stock prices. Short-term price reaction is a function of the strength of the recommendation, the magnitude of the change in recommendation, the

Rationality and Analysts' Forecast Bias

This paper proposes and tests a quadratic-loos utility function for modeling corporate earnings forecasting, where financial analysts trade off bias to improve management access and forecast

Analyst Forecasts and Herding Behavior

The use of analyst forecasts as proxies for investors' earnings expectations is commonplace in empirical research. An implicit assumption behind their use is that they reflect analysts' private
...