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Market reactions to the reports of a star resource analyst

Author

Listed:
  • Philip Brown

    (Australian School of Business UNSW and UWA Business School, Australia)

  • Alexey Feigin
  • Andrew Ferguson

Abstract

Keith Goode has for many years been one of Australia’s highest profile mining analysts. He is unique among them, being a commissioned analyst. Goode’s clients—mostly small cap mining companies with limited analyst coverage—pay for a report, which he publishes electronically, but only if his report is positive. Using reports published over eight years from September 2001, we estimate his clients typically benefit by about AUD$14m, or almost 10% of the company’s share market value, with much of the benefit coming almost immediately after the report’s release. Market liquidity surges in the first hour of trading, with the value of trades, flow of buy orders relative to sells, and level of overall activity all increasing significantly. To demonstrate significance, we develop ‘fractile analysis’, a robust, relatively powerful and quite general method for detecting abnormal market activity. Our study is relevant to day traders, analysts and other information intermediaries. The methodological refinement should also interest students of ‘abnormal’ market behaviour.

Suggested Citation

  • Philip Brown & Alexey Feigin & Andrew Ferguson, 2014. "Market reactions to the reports of a star resource analyst," Australian Journal of Management, Australian School of Business, vol. 39(1), pages 137-158, February.
    • Handle: RePEc:sae:ausman:v:39:y:2014:i:1:p:137-158
    DOI: 10.1177/0312896212470672
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    References listed on IDEAS

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    2. Xiaomeng Chen & Sue Wright & Hai Wu, 2018. "Exploration intensity, analysts’ private information development and their forecast performance," Accounting and Business Research, Taylor & Francis Journals, vol. 48(1), pages 77-107, January.
    3. Dean Katselas & Baljit K. Sidhu & Tom Smith & Chuan Yu, 2019. "Independently Certified Industry‐specific Disclosures to the Capital Market: The JORC Code in the Australian Mining Industry," Abacus, Accounting Foundation, University of Sydney, vol. 55(1), pages 128-179, March.
    4. Dean Katselas & Baljit K. Sidhu & Chuan Yu & Tom Smith, 2016. "Merging time-series Australian data across databases: challenges and solutions," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(4), pages 1071-1095, December.
    5. Kelvin Jui Keng Tan & Jia Min Lee & Robert W. Faff & Kathy Walsh, 2016. "Short-selling pressure and last-resort debt finance: evidence from 144A high-yield risk-adjusted debt," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(4), pages 1149-1185, December.
    6. Linnenluecke, Martina K. & Chen, Xiaoyan & Ling, Xin & Smith, Tom & Zhu, Yushu, 2016. "Emerging trends in Asia-Pacific finance research: A review of recent influential publications and a research agenda," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 66-76.

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