40 Pages Posted: 25 Mar 2008
Date Written: March, 17 2008
Theory suggests the most profitable way to exploit stock picking skill is to set up an investment fund, yet in practice buy-side and sell-side stock analysts coexist. We examine the relative merits of stock picks from institutional investors and brokerage analysts, and the extent to which institutions use sell-side analysts' recommendations. We find that sell-side analysts' recommendations are informative. Although mutual fund purchases significantly outperform their sales the difference, in performance is largely concentrated on the day of the trade. Mutual funds tend to trade in the direction of recommendation revisions but their trade direction is not incrementally informative.
Keywords: Analyst, Mutual Funds
JEL Classification: G12, G20
Suggested Citation: Suggested Citation
Busse, Jeffrey A. and Green, T. Clifton and Jegadeesh, Narasimhan, Stock Selection Skills and Career Choice: Buy Side vs. Sell Side (March, 17 2008). Available at SSRN: https://ssrn.com/abstract=1107359 or http://dx.doi.org/10.2139/ssrn.1107359
By Meb Faber