Put your money where your mouth is: Do financial firms follow their own recommendations?

Kin Wai Chan, Charles Chang and Albert Wang

The Quarterly Review of Economics and Finance, 2009, vol. 49, issue 3, pages 1095-1112

Abstract: In this paper, we explore how US financial firms trade relative to their own equity analyst recommendations. In the quarter-of and that immediately follow a recommendation, firm trades are significantly positively related to recommendation changes. This relation is robust to controls for sub-sample effects, return/momentum related phenomena, size effects, controls for consensus recommendation, and other data normalizations. Our results show that financial firm trades are consistent with their analysts' research and recommendations, despite recent conjecture to the contrary.

Keywords: Institutional; trading; Equity; analyst; Recommendation (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:eee:quaeco:v:49:y:2009:i:3:p:1095-1112

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