Who Benefits from Analyst “Top Picks”?

74 Pages Posted: 2 Nov 2020 Last revised: 12 Aug 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: October 2020

Abstract

Following the Global Settlement, analysts extensively use a top pick designation to highlight their highest conviction best ideas. Such a designation enables analysts to provide greater granularity of information, but it can potentially be influenced by conflicts of interest. Examining a comprehensive sample of top picks, we find, even though top picks are more likely to be investment banking clients, they have greater investment value, attract greater media and investor attention, and lead to more trading than buy recommendations. Bad top picks are more likely to be influenced by strategic objectives and have adverse consequences for analysts. Institutions, but not retail investors, discern between good and bad top picks.

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Suggested Citation

Birru, Justin and Gokkaya, Sinan and Liu, Xi and Stulz, René, Who Benefits from Analyst “Top Picks”? (October 2020). NBER Working Paper No. w28038, Available at SSRN: https://ssrn.com/abstract=3723275

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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