Asymmetric Effects of Sell-Side Analyst Optimism and Broker Market Share by Clientele

60 Pages Posted: 25 May 2010 Last revised: 1 Sep 2010

See all articles by Andrew R. Grant

Andrew R. Grant

University of Sydney - Discipline of Finance, Faculty of Economics and Business; Financial Research Network (FIRN)

Elvis Jarnecic

The University of Sydney; Financial Research Network (FIRN)

Mark Su

The University of Sydney

Date Written: August 23, 2010

Abstract

Using broker level data we demonstrate that relatively optimistic and relatively pessimistic analyst earnings forecasts both generate trade for their brokerage firms. This relationship is found to be asymmetric as the influence of relatively optimistic analyst forecasts on own broker market share is larger than the influence of relatively pessimistic analyst forecasts. Furthermore, upgrades and downgrades in recommendations also generate significantly higher broker market share, suggesting that sell-side institutions are rewarded for providing new information to the market. This study also provides evidence for the first time on how different broker clienteles react to earnings forecast and stock recommendations. Greater trade volume is found to be associated with optimistic earnings forecasts and stock recommendations are stronger for analysts affiliated with retail brokerage firms than those affiliated with institutional brokerage firms.

Keywords: Analyst Recommendations, Volume, Broker

JEL Classification: G10, G14, G24

Suggested Citation

Grant, Andrew R. and Jarnecic, Elvis and Su, Mark, Asymmetric Effects of Sell-Side Analyst Optimism and Broker Market Share by Clientele (August 23, 2010). Available at SSRN: https://ssrn.com/abstract=1614682 or http://dx.doi.org/10.2139/ssrn.1614682

Andrew R. Grant

University of Sydney - Discipline of Finance, Faculty of Economics and Business ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
61-2-9036-7991 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Elvis Jarnecic (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Mark Su

The University of Sydney ( email )

University of Sydney
Sydney, NC NSW 2006
Australia

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