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

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Additional URL

https://doi.org/10.2139/ssrn.2023032

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