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Who Benefits from Analyst "Top Picks"?

Author

Listed:
  • Birru, Justin

    (Ohio State U)

  • Gokkaya, Sinan

    (Ohio U)

  • Liu, Xi

    (Miami U of Ohio)

  • Stulz, Rene M.

    (Ohio State U and European Corporate Governance Institute)

Abstract

Following the Global Settlement, analysts extensively use a top pick designation to highlight their highest conviction best ideas. Such a designation enables analysts to provide greater granularity of information, but it can potentially be influenced by conflicts of interest. Examining a comprehensive sample of top picks, we find, even though top picks are more likely to be investment banking clients, they have greater investment value, attract greater media and investor attention, and lead to more trading than buy recommendations. Bad top picks are more likely to be influenced by strategic objectives and have adverse consequences for analysts. Institutions, but not retail investors, discern between good and bad top picks.

Suggested Citation

  • Birru, Justin & Gokkaya, Sinan & Liu, Xi & Stulz, Rene M., 2020. "Who Benefits from Analyst "Top Picks"?," Working Paper Series 2020-24, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2020-24
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    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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