The Influence of Buy-Side Analysts on Mutual Fund Trading

40 Pages Posted: 16 Feb 2009 Last revised: 27 Jan 2014

See all articles by Stefan Frey

Stefan Frey

Leibniz Universität Hannover; Centre for Financial Research (CFR)

Patrick Herbst

University of Stirling - Department of Accounting and Finance

Date Written: July 13, 2013

Abstract

We present evidence on the trading and performance impact of buy-side analysts. Using data provided by a large global asset manager, we relate buy-side analysts' recommendations to fund transactions on a daily basis. We show that buy-side analysts significantly influence trading decisions: Fund managers strongly follow recent recommendation revisions, even after controlling for other trading determinants. Positive abnormal returns to buy-side analysts' revisions are also reflected in the performance of mutual fund trades: Trades triggered by buy-side recommendations have higher returns than other trades. Overall, the impact of buy-side analysts is more pronounced than that of sell-side analysts.

Keywords: Buy-side analysts, analyst recommendations, mutual funds, investment decisions, investment performance

JEL Classification: G23, G11, M41, G29

Suggested Citation

Frey, Stefan and Herbst, Patrick, The Influence of Buy-Side Analysts on Mutual Fund Trading (July 13, 2013). Available at SSRN: https://ssrn.com/abstract=1343771 or http://dx.doi.org/10.2139/ssrn.1343771

Stefan Frey

Leibniz Universität Hannover

Koenigsworther Platz 1
30167 Hannover, DE 30167
Germany

Centre for Financial Research (CFR) ( email )

Albertus-Magnus Platz
Cologne, 50923
Germany

Patrick Herbst (Contact Author)

University of Stirling - Department of Accounting and Finance ( email )

Stirling, Scotland FK9 4LA
United Kingdom

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