Market Reactions to the Reports of a Star Resource Analyst

23 Pages Posted: 11 Feb 2014 Last revised: 20 Feb 2014

See all articles by Philip R. Brown

Philip R. Brown

UWA Business School, M250; Financial Research Network (FIRN)

Alexey Feigin

University of Technology Sydney (UTS) - School of Accounting

Andrew Ferguson

University of Technology, Sydney - Discipline of Accounting; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Date Written: February 11, 2014

Abstract

Keith Goode has for many years been one of Australia’s highest profile mining analysts. He is unique among them, being a commissioned analyst. Goode’s clients — mostly small cap mining companies with limited analyst coverage — pay for a report, which he publishes electronically, but only if his report is positive. Using reports published over eight years from September 2001, we estimate his clients typically benefit by about AUD $14m, or almost 10% of the company’s share market value, with much of the benefit coming almost immediately after the report’s release. Market liquidity surges in the first hour of trading, with the value of trades, flow of buy orders relative to sells, and level of overall activity all increasing significantly. To demonstrate significance, we develop 'fractile analysis', a robust, relatively powerful and quite general method for detecting abnormal market activity. Our study is relevant to day traders, analysts and other information intermediaries. The methodological refinement should also interest students of 'abnormal' market behaviour.

Keywords: detecting abnormal market behavior, gold, extractive industries, market microstructure, specialist, star analyst

Suggested Citation

Brown, Philip R. and Feigin, Alexey and Ferguson, Andrew, Market Reactions to the Reports of a Star Resource Analyst (February 11, 2014). Australian Journal of Management, Vol. 39, No. 1, 2014; FIRN Research Paper. Available at SSRN: https://ssrn.com/abstract=2393968

Philip R. Brown

UWA Business School, M250 ( email )

Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

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

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

Alexey Feigin (Contact Author)

University of Technology Sydney (UTS) - School of Accounting ( email )

P.O. Box 123
Broadway NSW 2007
AUSTRALIA

Andrew Ferguson

University of Technology, Sydney - Discipline of Accounting ( email )

P.O. Box 123 Broadway
Sydney, NSW 2007
Australia
02 9514 3565 (Phone)
02 9514 3669 (Fax)

Financial Research Network (FIRN)

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

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

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

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