Abstract

http://ssrn.com/abstract=687584
 
 

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How Informative are Analyst Recommendations and Insider Trades?


Jim Hsieh


George Mason University

Lilian K. Ng


University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business

Qinghai Wang


Georgia Institute of Technology

April 12, 2005

AFA 2006 Boston Meetings Paper

Abstract:     
This study jointly evaluates the informativeness of insider trades and analyst recommendations. We show that the two activities often generate contradictory signals. Insiders in aggregate buy more shares when their firm's stock is unfavorably recommended or downgraded by analysts than when it is favorably recommended or upgraded. This result is robust to various controls such as varying degrees of analyst coverage, firm size, book-to-market ratios, and stock price momentum. We find that analyst recommendations affect insider trading decisions, but not vice versa. Our further analysis shows that insider trading is informative when signaling positive information, and analyst recommendations are informative when conveying negative information. The overall results imply that corporate insiders and financial analysts do not substitute each other's informational role in the financial market.

Number of Pages in PDF File: 46

Keywords: Analyst recommendations, Insider trades

JEL Classification: G14

working papers series


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Date posted: March 21, 2005  

Suggested Citation

Hsieh, Jim and Ng, Lilian K. and Wang, Qinghai, How Informative are Analyst Recommendations and Insider Trades? (April 12, 2005). AFA 2006 Boston Meetings Paper. Available at SSRN: http://ssrn.com/abstract=687584 or http://dx.doi.org/10.2139/ssrn.687584

Contact Information

Jim Hsieh
George Mason University ( email )
4400 University Dr, MSN 5F5
George Mason University
Fairfax, VA 22030
United States
Lilian K. Ng (Contact Author)
University of Wisconsin - Milwaukee - Sheldon B. Lubar School of Business ( email )
P.O. Box 742
3202 N. Maryland Ave.
Milwaukee, WI 53201-0742
United States
414-229-5925 (Phone)
414-229-6957 (Fax)
Qinghai Wang
Georgia Institute of Technology ( email )
800 West Peachtree St., NW
Atlanta, GA 30308-1149
United States
404-3853266 (Phone)
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