Do Analysts Generate Trade for Their Firms? Evidence from the Toronto Stock Exchange

Posted: 23 May 2001

Abstract

It has generally been assumed that potential commission revenue is an important determinant of a sell-side analyst's decision of what firms to cover and what information to publicly release. However, because stock volume has not been disaggregated on a brokerage-firm level, uncertainty remains regarding the economic importance of the relation between analyst coverage and brokerage-firm volume. Using a unique data set that identifies the broker(s) involved in each trade, I find that brokerage volume is significantly higher in covered stocks than in uncovered stocks. On average, brokers increase their market share in covered stocks by 3.8% relative to uncovered stocks.

Keywords: Capital markets, analyst coverage, brokerage-firm trading volume

JEL Classification: G24, G14, G29

Suggested Citation

Irvine, Paul J., Do Analysts Generate Trade for Their Firms? Evidence from the Toronto Stock Exchange. Journal of Accounting and Economics, Vol. 30, No. 2. Available at SSRN: https://ssrn.com/abstract=262115

Paul J. Irvine (Contact Author)

Neeley School of Business ( email )

Fort Worth, TX 76129
United States

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