Do European Brokers Add any Value Through Recommendations?

13 Pages Posted: 18 Mar 2010 Last revised: 12 Apr 2010

See all articles by Campbell R. Harvey

Campbell R. Harvey

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)

Sandy Rattray

Man Group plc

Joachim Utans

GLG Partners Inc.

Yasser Mawji

GLG Partners Inc.

Date Written: September 1, 2009

Abstract

We examine whether broker recommendations add value in Europe. In contrast to extant research, we focus on a non-U.S. sample that post-dates the important regulatory changes of 2003/4. Our analysis suggests that European brokers’ recommendations outperform a standard benchmark during the 2005-2009 period. Trade ideas from research sales-people, the people in daily contact with fund managers, provide better performance than recommendations directly from research departments. Our results also indicate that brokers are far better at selecting long ideas than short ideas, and have been for many years. We also show that a simple strategy based on broker ideas would comfortably be in the top quartile of UK pan-European mutual funds for each complete year for which we have data.

Keywords: Broker recommendations, Analyst forecasts, Best ideas, European brokers, Long recommendations, Short recommendations, Earnings forecasts, Research salesperson

JEL Classification: G10, G11, G14, G24, M40, M41

Suggested Citation

Harvey, Campbell R. and Rattray, Sandy and Utans, Joachim and Mawji, Yasser, Do European Brokers Add any Value Through Recommendations? (September 1, 2009). Available at SSRN: https://ssrn.com/abstract=1572826 or http://dx.doi.org/10.2139/ssrn.1572826

Campbell R. Harvey (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7768 (Phone)

HOME PAGE: http://www.duke.edu/~charvey

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sandy Rattray

Man Group plc

Riverbank House
2 Swan Lane
London, EC4R 3AD
United Kingdom

Joachim Utans

GLG Partners Inc. ( email )

London
United Kingdom

Yasser Mawji

GLG Partners Inc. ( email )

London
United Kingdom

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