Farmer School of Business
Department of Finance
800 E. High St.
Oxford, OH 45056
Institutional Affiliation: Miami University
NBER Working Papers and Publications
|July 2019||Are Analyst Trade Ideas Valuable?|
with Justin Birru, Sinan Gokkaya, René M. Stulz: w26062
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.