An Analysis of Stock Recommendations

Posted: 23 Jan 2003

See all articles by Phillip C. Stocken

Phillip C. Stocken

Dartmouth College - Tuck School of Business

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group

Multiple version iconThere are 2 versions of this paper

Abstract

We study the information content of stock reports when investors are uncertain about a financial analyst's incentives. Incentives may be aligned, in which case the analyst wishes to credibly convey information, or incentives may be misaligned. We find the following: Any investor uncertainty about incentives makes full revelation of information impossible. Categorical ranking systems, such as those commonly used by brokerages, arise endogenously as equilibria. Under certain conditions, analysts with aligned incentives can credibly convey unfavorable information but can never credibly convey favorable information. Finally, we compare testable implications of the model to empirical properties of stock recommendations.

Suggested Citation

Stocken, Phillip C. and Morgan, John, An Analysis of Stock Recommendations. RAND Journal of Economics, Spring 2003, Vol. 34, No. 1. Available at SSRN: https://ssrn.com/abstract=366610

Phillip C. Stocken (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States
603-646-2843 (Phone)

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States
510-642-2669 (Phone)
810-885-5959 (Fax)

HOME PAGE: http://faculty.haas.berkeley.edu/rjmorgan/

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,049
PlumX Metrics