Should Information be Sold Separately? Evidence from MiFID II

68 Pages Posted: 17 Jun 2019 Last revised: 12 Jun 2021

See all articles by Yifeng Guo

Yifeng Guo

Columbia University - Columbia Business School, Finance

Lira Mota

Columbia University - Columbia Business School, Finance

Date Written: January 30, 2019

Abstract

Information production is key to the efficiency of financial markets. Does selling information separately improve its production? We investigate this question using MiFID II, a European regulation that unbundles research from transactions. We show that unbundling causes fewer research analysts to cover a firm. This decrease does not come from small- or mid-cap firms but is concentrated in large firms. Surprisingly, the reduction in analyst coverage is accompanied by a decrease in forecast error. Further analyses suggest that analyst competition enhancement could drive the results: inaccurate analysts drop out, and analysts who stay produce more accurate research.

Keywords: Analyst Research, Information Production, MiFID II, Unbundling

JEL Classification: G00, G14, G28

Suggested Citation

Guo, Yifeng and Mota, Lira, Should Information be Sold Separately? Evidence from MiFID II (January 30, 2019). Available at SSRN: https://ssrn.com/abstract=3399506 or http://dx.doi.org/10.2139/ssrn.3399506

Yifeng Guo

Columbia University - Columbia Business School, Finance ( email )

NY
United States

Lira Mota (Contact Author)

Columbia University - Columbia Business School, Finance ( email )

NY
United States
10027 (Fax)

HOME PAGE: http://sites.google.com/view/liramota

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