Financial Analysts and Price Discovery

24 Pages Posted: 29 Feb 2008

See all articles by Michael J. Aitken

Michael J. Aitken

Macquarie Graduate School of Management

Niall Almeida

affiliation not provided to SSRN

Frederick H. deB. Harris

affiliation not provided to SSRN

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics

Date Written: 2007-05-08

Abstract

We show that whether or not a bank/brokerage firm has top-rated financial analysts and high Wall Street Search rankings for their research is significantly related to that firm's contribution to price discovery, the process by which information is incorporated into stock prices. Our study relates cross-sectional characteristics of the quality of brokerage research, the asymmetric information environment, and order flow volume to a microstructure measure of price discovery developed by Granger and Gonzalo. We measure analysts research quality with an industry-specific ranking by institutional investors, with an opinion survey of trading desk personnel, and with the number of top 3 analysts across all industries employed by the bank/brokerage firm.

Suggested Citation

Aitken, Michael J. and Almeida, Niall and Harris, Frederick H. deB. and McInish, Thomas H., Financial Analysts and Price Discovery (2007-05-08). Accounting & Finance, Vol. 48, Issue 1, pp. 1-24, March 2008. Available at SSRN: https://ssrn.com/abstract=1100195 or http://dx.doi.org/10.1111/j.1467-629X.2007.00235.x

Michael J. Aitken (Contact Author)

Macquarie Graduate School of Management ( email )

North Ryde
Sydney, New South Wales 2109
Australia

Niall Almeida

affiliation not provided to SSRN

No Address Available

Frederick H. deB. Harris

affiliation not provided to SSRN

No Address Available

Thomas H. McInish

University of Memphis - Fogelman College of Business and Economics ( email )

Memphis, TN 38152
United States
901-678-4662 (Phone)
901-678-3006 (Fax)

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