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The greater the volume, the greater the analyst

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  • Karmaziene, Egle

Abstract

Are sell-side security analysts paid for turnover-generating research? Using hand-collected annual income data from tax records in Sweden for the 1997-2007-year period, I show that analysts’ compensations increase in the trading turnover that their recommendations generate. Analysts are paid 0.002 % of broker-trading volume, or approximately 1 % of broker’s commission revenues. The findings empirically validate the previously assumed turnover-compensation link and estimate its magnitude. The results may have policy implications related to the Markets in Financial Instruments Directive.

Suggested Citation

  • Karmaziene, Egle, 2023. "The greater the volume, the greater the analyst," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005542
    DOI: 10.1016/j.frl.2022.103377
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    References listed on IDEAS

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    Cited by:

    1. Jinzhi Lu & Pingyang Gao, 2024. "A Theory of Investors' Disclosure," Papers 2404.07630, arXiv.org, revised Nov 2025.
    2. Riefler, Raul & Tosun, Onur Kemal & Baeckström, Ylva, 2023. "The role of gender in sales behaviour: Evidence from institutional financial brokerage," Finance Research Letters, Elsevier, vol. 55(PA).
    3. Moreno, Alejandro & Ordieres-Meré, Joaquín, 2025. "Predicting stock price trends using language models to extract the sentiment from analyst reports: Evidence from IBEX 35-listed companies," Economics Letters, Elsevier, vol. 254(C).
    4. Ji, Xu & Dong, Yan & Vagnani, Gianluca & Yang, Xiaoqi, 2024. "Stock market reactions and optimism bias in analysts’ earnings forecasts: An analysis of China's stock markets," Finance Research Letters, Elsevier, vol. 59(C).
    5. José Gabriel Astaíza-Gómez, 2025. "Toma de decisiones de inversión en el espacio información-rentabilidad [Investment Decision-Making in the Information-Return Space]," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 39, pages 1-11, June.
    6. Chang, Danting & Li, Feng, 2023. "Uncovering the information content in abnormal institutional visits," Finance Research Letters, Elsevier, vol. 55(PB).
    7. Hou, Yunfei & Hu, Changsheng, 2023. "Understanding the role of aggregate analyst attention in resolving stock market uncertainty," Finance Research Letters, Elsevier, vol. 57(C).
    8. Zhang, Hao & Zhu, Yimeng, 2024. "Financial knowledge, executive decision making and enterprise innovation," Finance Research Letters, Elsevier, vol. 61(C).

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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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