Publication Type
Working Paper
Publication Date
3-2012
Abstract
Are sell-side analysts reluctant to go against the investment views of their hedge fund clients? We show that analysts tend to upgrade stocks recently bought and downgrade stocks recently sold by hedge funds. Relative to other buy and strong buy recommendations, similar recommendations on stocks predominantly held by hedge funds parlay into poorer three-month and six-month stock returns. Hedge funds concurrently offload their stock holdings when analysts issue flattering reports. In line with an agency based explanation, our results are more pronounced for important brokerage clients such as high dollar turnover hedge funds and hedge funds who are prime brokerage clients of the analyst’s investment bank.
Keywords
analysts, hedge funds, agency, conflicts of interests
Discipline
Accounting | Finance and Financial Management | Portfolio and Security Analysis
Research Areas
Financial Performance Analysis; Finance
First Page
1
Last Page
44
Publisher
SMU School of Accountancy Research Paper No. 2013-03
City or Country
Singapore
Citation
CHUNG, Sung Gon and TEO, Melvyn.
Hedge Funds and Analyst Conflict of Interest. (2012). 1-44.
Available at: https://ink.library.smu.edu.sg/soa_research/996
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.2139/ssrn.2023032
Included in
Accounting Commons, Finance and Financial Management Commons, Portfolio and Security Analysis Commons