Abstract

http://ssrn.com/abstract=1095808
 
 

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Sell Side School Ties


Andrea Frazzini


AQR Capital Management, LLC

Christopher J. Malloy


Harvard Business School; National Bureau of Economic Research (NBER)

Lauren Cohen


Harvard Business School; National Bureau of Economic Research (NBER)

February 20, 2008

Harvard Business School Finance Working Paper No. 08-074

Abstract:     
We study the impact of social networks on agents' ability to gather superior information about firms. Exploiting novel data on the educational backgrounds of sell-side equity analysts and senior officers of firms, we test the hypothesis that analysts' school ties to senior officers impart comparative information advantages in the production of analyst research. We find evidence that analysts outperform on their stock recommendations when they have an educational link to the company. A simple portfolio strategy of going long the buy recommendations with school ties and going short buy recommendations without ties earns returns of 5.40% per year. We test whether Regulation FD, targeted at impeding selective disclosure, constrained the use of direct access to senior management. We find a large effect: pre-Reg FD the return premium from school ties was 8.16% per year, while post-Reg FD the return premium is nearly zero and insignificant.

Number of Pages in PDF File: 46

Keywords: Social networks, connections, analysts, directors

JEL Classification: G10, G11, G14

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Date posted: February 20, 2008  

Suggested Citation

Frazzini, Andrea and Malloy, Christopher J. and Cohen, Lauren, Sell Side School Ties (February 20, 2008). Harvard Business School Finance Working Paper No. 08-074. Available at SSRN: http://ssrn.com/abstract=1095808 or http://dx.doi.org/10.2139/ssrn.1095808

Contact Information

Andrea Frazzini
AQR Capital Management, LLC ( email )
Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
United States
203-742-3894 (Phone)
203-742-3394 (Fax)
HOME PAGE: http://www.econ.yale.edu/~af227/
Christopher J. Malloy (Contact Author)
Harvard Business School ( email )
Soldiers Field Road
Baker Library 277
Boston, MA 02163
United States
617-495-4383 (Phone)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Lauren Cohen
Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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