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Are Analyst Trade Ideas Valuable?

Author

Listed:
  • Birru, Justin

    (Ohio State University (OSU) - Department of Finance)

  • Gokkaya, Sinan

    (Department of Finance, Ohio University; Ohio State University (OSU) - Department of Finance)

  • Liu, Xi

    (Miami University of Ohio - Richard T. Farmer School of Business Administration)

  • Stulz, Rene M.

    (Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI))

Abstract

Using a novel database, we show that the stock-price impact of analyst trade ideas is at least as large as the impact of stock recommendation, target price, and earnings forecast changes, and that investors following trade ideas can earn significant abnormal returns. Trade ideas triggered by forthcoming firm catalyst events are more informative than ideas exploiting temporary mispricing. Institutional investors trade in the direction of trade ideas and commission-paying institutional clients do so earlier than non-clients. Analysts generating trade ideas are more established and are more likely to produce ideas for stocks with high dollar trading commissions in their coverage universe.

Suggested Citation

  • Birru, Justin & Gokkaya, Sinan & Liu, Xi & Stulz, Rene M., 2019. "Are Analyst Trade Ideas Valuable?," Working Paper Series 2019-15, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2019-15
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    Cited by:

    1. Franzoni, Francesco & Di Maggio, Marco & Egan, Mark, 2019. "The Value of Intermediation in the Stock Market," CEPR Discussion Papers 13936, C.E.P.R. Discussion Papers.
    2. Di Maggio, Marco & Egan, Mark & Franzoni, Francesco, 2022. "The value of intermediation in the stock market," Journal of Financial Economics, Elsevier, vol. 145(2), pages 208-233.
    3. Qionglin Liu & Yinghui Tang & Miaomiao Yu, 2025. "A new discrete-time queueing model to optimize cargo dispatch for a warehouse," Operational Research, Springer, vol. 25(1), pages 1-33, March.

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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