Put Your Money Where Your Mouth is: Do Financial Firms Follow Their Own Recommendations?

36 Pages Posted: 14 Feb 2005

See all articles by Albert Wang

Albert Wang

Cornell University - School of Applied Economics and Management

Kin Wai Chan

Hong Kong University of Science & Technology (HKUST) - Department of Finance

Charles Chang

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

Abstract

We explore how financial firms trade on in-house, US equity recommendations. We match the quarterly trades of financial firms with their own recommendations and document their trading patterns before, in the same quarter as, and after issuing recommendations. We find that net trade is more positive around upgrades than downgrades for all periods, and these relations are particularly significant in the quarter of and quarter immediately after the recommendation change. Contrary to public criticism of financial firms, these empirical relations suggest that financial firms actually do "put their money where their mouths are."

Keywords: Analyst, recommendations

JEL Classification: G14, G20

Suggested Citation

Wang, Albert and Chan, Kin Wai and Chang, Charles, Put Your Money Where Your Mouth is: Do Financial Firms Follow Their Own Recommendations?. Available at SSRN: https://ssrn.com/abstract=575201 or http://dx.doi.org/10.2139/ssrn.575201

Albert Wang (Contact Author)

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States

Kin Wai Chan

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong

Charles Chang

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

Shanghai Jiao Tong University
211 West Huaihai Road
Shanghai, 200030
China

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