Do connections with buy-side analysts inform sell-side analyst research?

Gjergji Cici, Philip B. Shane and Yanhua Sunny Yang

No 17-04, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

Abstract: We hypothesize that connections with buy-side analysts provide a sell-side analyst with private information generated by the buy-side that enhances the quality of sell-side research. We proxy for these connections with the number of stocks at the intersection of stocks held in the portfolios of institutional investors and followed by the sell-side analyst. The larger this intersection, the more opportunities the sell-side analyst has to interact with institutional investors. We proxy for the research quality of the sell-side analyst with the relative accuracy of her earnings forecasts. We find that such connections enhance the accuracy of earnings forecasts, but up to a point of diminishing returns. Additional tests rule out that the observed association is due to reverse causality.

Date: 2017
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:1704

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