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The influence of buy-side analysts on mutual fund trading

Author

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  • Frey, Stefan
  • Herbst, Patrick

Abstract

We present evidence on the trading and performance impact of buy-side analysts. Using data provided by a large global asset manager, we relate buy-side analysts’ recommendations to fund transactions on a daily basis. We show that buy-side analysts significantly influence trading decisions: Fund managers strongly follow recent recommendation revisions, even after controlling for other trading determinants. Positive abnormal returns to buy-side analysts’ revisions are also reflected in the performance of mutual fund trades: Trades triggered by buy-side recommendations have higher returns than other trades. Overall, the impact of buy-side analysts is more pronounced than that of sell-side analysts.

Suggested Citation

  • Frey, Stefan & Herbst, Patrick, 2014. "The influence of buy-side analysts on mutual fund trading," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 442-458.
  • Handle: RePEc:eee:jbfina:v:49:y:2014:i:c:p:442-458
    DOI: 10.1016/j.jbankfin.2014.01.007
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    References listed on IDEAS

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    Cited by:

    1. Brown, Lawrence D. & Call, Andrew C. & Clement, Michael B. & Sharp, Nathan Y., 2016. "The activities of buy-side analysts and the determinants of their stock recommendations," Journal of Accounting and Economics, Elsevier, vol. 62(1), pages 139-156.
    2. Cici, Gjergji & Rosenfeld, Claire, 2016. "A study of analyst-run mutual funds: The abilities and roles of buy-side analysts," Journal of Empirical Finance, Elsevier, vol. 36(C), pages 8-29.
    3. Hobbs, Jeffrey & Singh, Vivek, 2015. "A comparison of buy-side and sell-side analysts," Review of Financial Economics, Elsevier, vol. 24(C), pages 42-51.

    More about this item

    Keywords

    Buy-side analysts; Analyst recommendations; Mutual funds; Investment decisions; Investment performance;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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