What Motivates Buy-Side Analysts to Share Recommendations Online?

Steven Crawford (), Wesley Gray (), Bryan R. Johnson () and Richard A. Price ()
Additional contact information
Steven Crawford: University of Houston, Houston, Texas 77004
Wesley Gray: Alpha Architect, Broomall, Pennsylvania 19008
Bryan R. Johnson: Creighton University, Omaha, Nebraska 68178
Richard A. Price: University of Oklahoma, Norman, Oklahoma 73019

Management Science, 2018, vol. 64, issue 6, 2574-2589

Abstract: We examine why buy-side analysts share investment ideas on SumZero.com, a private social networking website designed to facilitate interaction and information sharing among buy-side professionals. We explore labor market motivations for information sharing and document that analysts with strong incentives to build a reputation (i.e., those who did not attend a top 10 university and those employed at small funds) are significantly more likely to share recommendations. Our findings indicate that analysts who share ideas are more likely to change jobs and that the likelihood of employment change is positively related to the ratings provided by peers. We also document that analyst recommendations generate significant returns when they are posted on SumZero and that prices drift in the direction of the recommendation. Long-window returns are particularly strong for contrarian buy recommendations and for most sell recommendations. Overall, we show that buy-side analysts share valuable private information in an online social network and that this can be an effective reputation-building and job-seeking tool.

Keywords: security analysts; stock recommendations; hedge funds; social networks; buy-side analysts (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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