Can research committees add value for investors. An analysis of Lehman Brothers Ten Uncommon Values recommendations

Boris Groysberg (), Paul Healy () and Yang Gui ()
Additional contact information
Boris Groysberg: Harvard Business School, Postal: Harvard Business School, Morgan Hall 395, Soldiers Field Road, Boston, MA 02163,
Paul Healy: Harvard Business School, Postal: Harvard Business School, Morgan Hall 331, Soldiers Field Road, Boston, MA 02163,
Yang Gui: ITG, Postal: Vice President, Algorithmic Trading, ITG, Inc.

Journal of Financial Transformation, 2008, vol. 24, 123-130

Abstract: Since 1949 Lehman Brothers has used an investment committee to select the top ten recommendations made by its analysts each year. We examine the performance of this committee’s recommendations and find that on average its selections generated abnormal returns of 2.7% at the recommendation announcement and 4.5% for the remainder of the year. This performance cannot be explained by changes in analyst recommendations and/or target prices that accompany the committee report. Nor was it due to analyst screening ability since the returns were higher than those earned from investing in analysts’ top stock picks that were not elected by the committee. Finally, we find that abnormal announcement returns and abnormal trading volume at the report publication are correlated with market-adjusted returns for the prior year’s stock selections, suggesting that investors believe that a successful process in one year is likely to be repeated the following year. We believe that these findings are particularly interesting given recent efforts to require firms to use research recommendation committees to improve the quality of research.

Keywords: investment committee; performance of stock recommendations; analysts; regulations; quality of research (search for similar items in EconPapers)
JEL-codes: G11 G17 G28 (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.capco.com/files/pdf/684/02_Management/0 ... 0recommendations.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:0831

Access Statistics for this article

Journal of Financial Transformation is currently edited by Prof. Shahin Shojai

More articles in Journal of Financial Transformation from Capco Institute 77 Water Street, 10th Floor, New York NY 10005.
Bibliographic data for series maintained by Prof. Shahin Shojai ( this e-mail address is bad, please contact ).