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Tipping

Author

Listed:
  • Paul Irvine
  • Marc Lipson
  • Andy Puckett

Abstract

We investigate the trading of institutions immediately before the release of analysts’ initial buy recommendations. We document abnormally high institutional trading volume and buying beginning five days before recommendations are publicly released. Abnormal buying is related to initiation characteristics that would require knowledge of the content of the report—such as the identity of the analyst and brokerage firm, and whether the recommendation is a strong buy. We confirm that institutions buying before the recommendation release earn abnormal profits. Our results are consistent with institutional traders receiving tips regarding the contents of forthcoming analysts’ reports.

Suggested Citation

  • Paul Irvine & Marc Lipson & Andy Puckett, 2007. "Tipping," The Review of Financial Studies, Society for Financial Studies, vol. 20(3), pages 741-768.
    • Handle: RePEc:oup:rfinst:v:20:y:2007:i:3:p:741-768.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhl027
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    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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