Tipping

Paul Irvine, Marc Lipson and Andy Puckett

The Review of Financial Studies, 2007, vol. 20, issue 3, 741-768

Abstract: We investigate the trading of institutions immediately before the release of analysts’ initial buy recommendations. We document abnormally high institutional trading volume and buying beginning five days before recommendations are publicly released. Abnormal buying is related to initiation characteristics that would require knowledge of the content of the report—such as the identity of the analyst and brokerage firm, and whether the recommendation is a strong buy. We confirm that institutions buying before the recommendation release earn abnormal profits. Our results are consistent with institutional traders receiving tips regarding the contents of forthcoming analysts’ reports.

JEL-codes: G14 G18 G24 (search for similar items in EconPapers)
Date: 2007
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