Buy-Side Analysts, Sell-Side Analysts and Private Information Production Activities

54 Pages Posted: 2 Jun 2006

See all articles by Gilad Livne

Gilad Livne

University of Exeter Business School

Date Written: March 2006

Abstract

This paper analyzes the effect of coverage initiation by a sell-side analyst on the production of private information. It shows that the sell-side analyst's information production may crowd out information production by buy-side analysts. Nonetheless, coverage initiation increases the total amount of private information that is available to institutional investors. Coverage initiation may result in greater losses sustained by liquidity traders and lower information gathering costs in the economy. It may also lead to higher market liquidity and lower price efficiency. Examining investment-banking relationship within a brokerage house, it is possible that prohibiting such relationship may decrease the overall amount of information available to institutional investors and price efficiency.

Keywords: Buy-side analysts, sell-side analysts, coverage initiation, market liquidity, price efficiency

JEL Classification: G14, G24

Suggested Citation

Livne, Gilad, Buy-Side Analysts, Sell-Side Analysts and Private Information Production Activities (March 2006). EFA 2006 Zurich Meetings Paper; Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=906088 or http://dx.doi.org/10.2139/ssrn.906088

Gilad Livne (Contact Author)

University of Exeter Business School ( email )

Streatham Court
Rennes Drive
Exeter, EX4 4JH
United Kingdom
+44(0)1392 724436 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
207
rank
144,337
Abstract Views
1,256
PlumX Metrics