Who Benefits from Analyst "Top Picks"?

Justin Birru, Sinan Gokkaya, Xi Liu and Rene M. Stulz
Additional contact information
Justin Birru: Ohio State U
Sinan Gokkaya: Ohio U
Xi Liu: Miami U of Ohio
Rene M. Stulz: Ohio State U and European Corporate Governance Institute

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: Following the Global Settlement, analysts extensively use a top pick designation to highlight their highest conviction best ideas. Such a designation enables analysts to provide greater granularity of information, but it can potentially be influenced by conflicts of interest. Examining a comprehensive sample of top picks, we find, even though top picks are more likely to be investment banking clients, they have greater investment value, attract greater media and investor attention, and lead to more trading than buy recommendations. Bad top picks are more likely to be influenced by strategic objectives and have adverse consequences for analysts. Institutions, but not retail investors, discern between good and bad top picks.

JEL-codes: G11 G12 G14 G20 G23 G24 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-cwa and nep-fmk
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2020-24

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