Do Sell-Side Analysts Say Buy While Whispering Sell?

70 Pages Posted: 5 Sep 2019 Last revised: 14 Jan 2020

See all articles by Yushui Shi

Yushui Shi

University of California, Irvine - Paul Merage School of Business

Date Written: January 13, 2020


We revisit the role of sell-side equity analysts in information disclosure when they work in networks with fund managers while issuing public reports. We hypothesize that analysts disclose more precise, private information to fund managers than to the public. We focus on one specific identifiable phenomenon that analysts tell the public to buy while whispering fund managers to sell. We measure the likelihood of such behaviors based upon the percentage of managers’ selling stocks that analysts recommend to buy. Using mutual fund managers’ votes for sell-side analysts in a Chinese “star analyst” competition as a proxy for managers’ evaluations of analysts, we find that managers are more likely to vote for the analysts who exhibit more say-buy-whisper-sell behaviors with these managers. The result suggests that fund managers return favor to analysts who provide private information. Consistent with fund managers receiving private information from connected analysts as revealed in managers’ votes, we find that fund managers are more likely to buy or sell the stocks if these stocks are recommended as positively by the analysts they vote for. Fund managers also make higher profits from such analyst-recommended stocks than other stocks in their holdings. Such differentiation of information by analysts incurs a significant cost on retail investors who can only follow analysts’ positive recommendations unconditionally; compared with informed fund managers, they earn 150 basis points less returns over 2 to 40 tradings day following positive public recommendations.

Keywords: Analyst Recommendations; Mutual Fund; Private Information Communication

JEL Classification: G00, G23, L15

Suggested Citation

Shi, Yushui, Do Sell-Side Analysts Say Buy While Whispering Sell? (January 13, 2020). Available at SSRN: or

Yushui Shi (Contact Author)

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States

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