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The Speed of Information and the Sell-Side Research Industry

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  • Bradley, Daniel
  • Clarke, Jonathan
  • Zeng, Linghang

Abstract

Between 2009 and 2013, the Fly on the Wall (FLY) leaked 58% of recommendation revisions with a median delay of 27 minutes relative to the IBES announcement time. We show that FLY improves price discovery, but leaked recommendations hamper brokers’ ability to offer price improvement on trades routed through them. Three major brokers sued FLY; using key court dates, we show significant wealth and real effects to the brokerage industry. Overall, the speed with which analyst recommendations are disseminated has led to more rapid price discovery at the expense of a decline in the scope of the sell-side research industry.

Suggested Citation

  • Bradley, Daniel & Clarke, Jonathan & Zeng, Linghang, 2020. "The Speed of Information and the Sell-Side Research Industry," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 55(5), pages 1467-1490, August.
    • Handle: RePEc:cup:jfinqa:v:55:y:2020:i:5:p:1467-1490_2
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    Cited by:

    1. Gu, Chen & Kurov, Alexander, 2020. "Informational role of social media: Evidence from Twitter sentiment," Journal of Banking & Finance, Elsevier, vol. 121(C).

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