Do Buy-Side Recommendations Have Investment Value?

66 Pages Posted: 18 Mar 2012 Last revised: 18 Sep 2012

See all articles by Steve Crawford

Steve Crawford

University of Houston

Wesley R. Gray

Alpha Architect; Drexel University - LeBow College of Business

Bryan Johnson

Creighton University

Richard A. Price

University of Oklahoma

Date Written: March 2012

Abstract

We examine a dataset consisting of comprehensive investment recommendations paired with analyst-specific information for over 1,100 buy-side analysts (predominantly analysts from hedge funds). Short recommendations from these analysts generate an immediate and significant decline in price, whereas long recommendations for small firms have positive short-term returns and exhibit a positive drift. The evidence suggests buy-side recommendations provide information to market participants and that buy-side firms front-run their own information events. We also explore institutional ownership changes and document a wealth transfer between the broader institutional market and buy-side firms in the sample.

Keywords: hedge funds, buy-side analysts, sell-side analysts, stock recommendations

JEL Classification: G10, G14

Suggested Citation

Crawford, Steve and Gray, Wesley R. and Johnson, Bryan and Price, Richard A., Do Buy-Side Recommendations Have Investment Value? (March 2012). AFA 2013 San Diego Meetings Paper. Available at SSRN: https://ssrn.com/abstract=2024175 or http://dx.doi.org/10.2139/ssrn.2024175

Steve Crawford

University of Houston ( email )

Houston, TX 77204
United States

Wesley R. Gray (Contact Author)

Alpha Architect ( email )

213 Foxcroft Road
Broomall, PA 19008
United States
7732304727 (Phone)

HOME PAGE: http://www.alphaarchitect.com

Drexel University - LeBow College of Business ( email )

3141 Chestnut St
Philadelphia, PA 19104
United States

HOME PAGE: http://www.lebow.drexel.edu/corporate-services/corporate-and-executive-education/executive-faculty

Bryan Johnson

Creighton University ( email )

2500 California Plaza
Omaha, NE 68178
United States

Richard A. Price

University of Oklahoma ( email )

307 W Brooks
Norman, OK 73019
United States
405-325-5759 (Phone)

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