Are Analyst Trade Ideas Valuable?

54 Pages Posted: 16 Jul 2019 Last revised: 18 Sep 2021

See all articles by Justin Birru

Justin Birru

Ohio State University (OSU) - Department of Finance

Sinan Gokkaya

Department of Finance, Ohio University

Xi Liu

Miami University of Ohio - Richard T. Farmer School of Business Administration

René Stulz

Ohio State University (OSU) - Fisher College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 2019

Abstract

Using a novel database, we show that the stock-price impact of analyst trade ideas is at least as large as the impact of stock recommendation, target price, and earnings forecast changes, and that investors following trade ideas can earn significant abnormal returns. Trade ideas triggered by forthcoming firm catalyst events are more informative than ideas exploiting temporary mispricing. Institutional investors trade in the direction of trade ideas and commission-paying institutional clients do so earlier than non-clients. Analysts generating trade ideas are more established and are more likely to produce ideas for stocks with high dollar trading commissions in their coverage universe.

Suggested Citation

Birru, Justin and Gokkaya, Sinan and Liu, Xi and Stulz, René, Are Analyst Trade Ideas Valuable? (July 2019). NBER Working Paper No. w26062, Available at SSRN: https://ssrn.com/abstract=3419923

Justin Birru (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Sinan Gokkaya

Department of Finance, Ohio University ( email )

207 Muck College of Business
Athens, OH 45701
United States

HOME PAGE: http://business.ohio.edu/about/faculty-staff/gokkaya-sinan/

Xi Liu

Miami University of Ohio - Richard T. Farmer School of Business Administration ( email )

Oxford, OH 45056
United States

René Stulz

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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