The Speed of Information and the Sell-Side Research Industry

Journal of Financial and Quantitative Analysis (JFQA), Forthcoming

Georgia Tech Scheller College of Business Research Paper No. 17-2

41 Pages Posted: 9 Dec 2016 Last revised: 24 Apr 2019

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business

Linghang Zeng

Babson College - Finance Division

Date Written: March 6, 2019

Abstract

Between 2009 and 2013, Theflyonthewall.com (FLY) leaks 58% of recommendation revisions with a median delay of 27 minutes relative to the I/B/E/S announcement time. We show FLY improves price discovery, but leaked recommendations hamper the ability of brokers to offer price improvement on trades routed through them. Three major brokers sued FLY and using key court dates, we show significant wealth and real effects to the brokerage industry. Overall, the speed with which analyst recommendations are disseminated has led to more rapid price discovery at the expense of a decline in the scope of the sell-side research industry.

Keywords: Value of analyst research, analysts' recommendations, Theflyonthewall.com, sell-side research

JEL Classification: G20, G23

Suggested Citation

Bradley, Daniel and Clarke, Jonathan and Zeng, Linghang, The Speed of Information and the Sell-Side Research Industry (March 6, 2019). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming; Georgia Tech Scheller College of Business Research Paper No. 17-2. Available at SSRN: https://ssrn.com/abstract=2882264 or http://dx.doi.org/10.2139/ssrn.2882264

Daniel Bradley (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States

Jonathan Clarke

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States
404-894-4929 (Phone)
404-894-6030 (Fax)

HOME PAGE: http://mgt.gatech.edu/directory/clarke.html

Linghang Zeng

Babson College - Finance Division ( email )

Babson Park, MA 02457-0310
United States

HOME PAGE: http://sites.google.com/view/linghang-zeng

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