Analyst Tipping: Additional Evidence

Abstract:     
We investigate whether the price run-up in a company’s stock prior to the initiation of analyst coverage with a favorable recommendation is related to the occurrence of an analyst-hosted invitation-only investor conference attended by the company. We document an average abnormal return of 2.41% (0.91%) during the twenty days prior to analyst initiations when conferences are hosted by initiating (non-initiating) analysts and 0.54% in the absence of these conferences. The abnormal returns are concentrated on conference days at 0.58% (0.17%) when conferences are hosted by initiating (non-initiating) analysts. Further, the price run-up and conference day returns predict the level of initiating recommendations. We conclude that investor conferences are significant venues where select investors obtain initiation-related information from initiating analysts or participating companies that other investors obtain when the initiations are publicly announced. Our conclusions are consistent with anecdotal evidence that securities firms communicate their research increasingly with the most profitable clients.

Number of Pages in PDF File: 37

Keywords: information leakage, equity analysts, investor conferences

JEL Classification: G11, G18, G24

working papers series