Marketing of Stocks by Brokerage Firms: The Role of Financial Analysts
Kee H. Chung
State University of New York at Buffalo - School of Management
This paper examines the role of financial analysts as a marketing aid to brokerage firms. This study suggests that investors prefer to hold stocks of high-quality companies and that financial analysts help the marketing efforts of brokerage companies by focusing their analysis on such stocks. This paper uses S&P's common stock rankings as empirical proxies for firm quality and finds that stocks rated by S&P are followed by more analysts than those not rated. Furthermore, among those stocks rated by S&P, highly-rated stocks are followed by more analysts than poorly-rated stocks. This study also finds a significant increase (decrease) in analyst following when S&P upgrades (downgrades) quality rankings. Overall, empirical evidence supports the marketing hypothesis of analyst following.
Number of Pages in PDF File: 31
Keywords: Marketing, Financial analysts, Stock rankings, Cognitive error
JEL Classification: G24working papers series
Date posted: October 29, 2000
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