49 Pages Posted: 14 Dec 2011 Last revised: 27 Oct 2013
Date Written: September 17, 2012
We examine a comprehensive set of investment recommendations paired with analyst-specific information from over 1,000 buy-side analysts (predominantly analysts from hedge funds) from the private website SumZero.com. Recommendations from these analysts generate significant returns when the reports are posted to the website. Returns are the most dramatic for contrarian recommendations (i.e., those issued contrary to the sell-side consensus), particularly for buy recommendations. Furthermore, the returns to both buy and sell recommendations drift in the direction of the recommendation. We also explore institutional ownership changes and document a wealth transfer between the broader institutional market and buy-side firms in the sample. Collectively, the evidence suggests buy-side recommendations have investment value. The results also document the importance of new technologies in disseminating information to market participants.
Keywords: Hedge funds, buy-side analysts, sell-side analysts, stock recommendations
JEL Classification: G10, G14
Suggested Citation: Suggested Citation
Crawford, Steve and Gray, Wesley R. and Johnson, Bryan and Price, Richard A., The Investment Value of Contrarian Buy-Side Recommendations (September 17, 2012). Available at SSRN: https://ssrn.com/abstract=1971533 or http://dx.doi.org/10.2139/ssrn.1971533
By John Graham