Affiliated mutual funds and analyst optimism

Journal of Financial Economics

Volumn 93, Issue 1, 2009, Pages 108-137

  Mola, Simona ^a   Guidolin, Massimo ^b,c  

^a ARIZONA STATE UNIVERSITY   (United States)

^b UNIVERSITY OF MANCHESTER   (United Kingdom)

^c FEDERAL RESERVE BANK OF ST LOUIS   (United States)

Author keywords

Analyst coverage; Analyst optimism; Mutual funds; Ratings

Indexed keywords

EID: 67449084255     PISSN: 0304405X     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jfineco.2008.06.006     Document Type: Article

References (77)

1. Barber B., Lehavy R., McNichols M., and Trueman B. Can investors profit from the prophets? Security analyst recommendations and stock returns. Journal of Finance 56 (2001) 531-563
2. Barber B., Lehavy R., McNichols M., and Trueman B. Buys, holds, and sells: the distribution of investment banks' stock ratings and the implications for the profitability of analysts' recommendations. Journal of Accounting and Economics 41 (2006) 87-117
3. Barron's, 2002. Stop it, both of you: fund managers deserve their share of blame for the stock-ratings debacle. Michael Santoli, 20 May, F2.
4. Bhushan R. Firm characteristics and analyst following. Journal of Accounting and Economics 11 (1989) 255-274
5. Bradley D., Jordan B., and Ritter J. The quiet period goes out with a bang. Journal of Finance 56 (2003) 1-36
6. Bradley D., Jordan B., and Ritter J. Analyst behavior following IPOs: the "bubble period" evidence. Review of Financial Studies 21 (2008) 101-133
7. Brennan M., and Hughes P. Stock prices and the supply of information. Journal of Finance 46 (1991) 1665-1691
8. Business Wire, 2002. Merrill Lynch announces agreement with New York State Attorney General: sets new industry standard for policies to protect independence and integrity of research, 21 May.
9. Cheng Y., Liu M., and Qian J. Buy-side analysts, sell-side analysts, and investment decisions of money managers. Journal of Financial and Quantitative Analysis 41 (2006) 51-83
10. Chung K. Marketing of stocks by brokerage firms: the role of financial analysts. Financial Management 29 (2000) 35-54
11. Chung K., and Cho S.-Y. Security analysis and market making. Journal of Intermediation 14 (2005) 114-141
12. Clarke J., Khorana A., Patel A., and Rau R. The impact of all-star analyst job changes on their coverage choices and investment banking deal flow. Journal of Financial Economics 84 (2007) 713-737
13. Cliff M. Do affiliated analysts mean what they say?. Financial Management 36 (2007) 5-29
14. Conrad J., Johnson K., and Wahal S. Institutional trading and soft dollars. Journal of Finance 56 (2001) 397-416
15. Corwin S., and Schultz P. The role of IPO underwriting syndicates: pricing, information production, and underwriter competition. Journal of Finance 60 (2005) 443-486
16. Cowen A., Groysberg B., and Healy P. Which types of analyst firms are more optimistic?. Journal of Accounting and Economics 41 (2006) 119-146
17. Dugar A., and Nathan S. The effects of investment banking relationships on financial analysts' earnings investment recommendations. Contemporary Accounting Research 12 (1995) 131-160
18. Ellis K., Michaely R., and O'Hara M. When the underwriter is the market maker: an examination of trading in the IPO aftermarket. Journal of Finance 55 (2000) 1039-1074
19. Francis J., and Philbrick D. Analysts' decisions as products of a multi-task environment. Journal of Accounting Research 31 (1993) 216-230
20. Gaspar J.-M., Massa M., and Matos P. Favoritism in mutual fund families? Evidence on strategic cross-fund subsidization. Journal of Finance 61 (2006) 73-104
21. Grinblatt M., and Titman S. Mutual fund performance: an analysis of quarterly portfolio holdings. Journal of Business 62 (1989) 393-416
22. Grinblatt M., and Titman S. The persistence of mutual fund performance. Journal of Finance 47 (1992) 1977-1984
23. Groysberg, B., Healy, P., Chapman, C., Shanthikumar, D., Gui, Y., 2007. Do Buy-side analysts out-perform the sell-side? Unpublished Working Paper, Harvard Business School, Cambridge, MA, USA.
24. Hayes R. The impact of trading commission incentives on analysts' stock coverage decisions and earnings forecasts. Journal of Accounting Research 36 (1998) 299-320
25. Hong H., and Kubik J. Analyzing the analysts: career concerns and biased earnings forecasts. Journal of Finance 58 (2003) 313-351
26. Institutional Investor, 2002a. Bye bye, "buy"? Investment banks are cleaning house, but analysts still avoid sell ratings. Anderson, J., Schack, J., 1 May.
27. Institutional Investor, 2002b. Promises, promises. Schack, J., 1 October.
28. Investment News, 2002. Analysts conflicts cut both ways: buy-side pressure tactics spur new AIMR guidelines. Hansard, S., August 19.
29. Irvine P. Do analysts generate trade for their firms? Evidence from Toronto stock exchange. Journal of Accounting and Economics 30 (2001) 209-226
30. Irvine P., Lipson M., and Puckett A. Tipping. Review of Financial Studies 20 (2006) 741-768
31. Irvine P., Simko P., and Nathan S. Asset management and affiliated analysts' forecasts. Financial Analysts Journal 60 (2004) 67-78
32. Jackson A. Trade generation, reputation, and sell-side analysts. Journal of Finance 55 (2005) 673-717
33. James C., and Karceski J. Investor monitoring and differences in mutual fund performance. Journal of Banking and Finance 30 (2006) 2787-2808
34. Jegadeesh N., Kim J., Krische S., and Lee C. Analyzing the analysts: when do recommendations add value?. Journal of Finance 59 (2004) 1083-1124
35. Johnson, W., Marietta-Westberg, J., 2005. Universal banking, asset management, and stock underwriting. Unpublished Working Paper, Michigan State University, East Lansing, MI, USA.
36. Kadan, O., Madureira, L., Wang, R., Zach, T., 2005. Conflicts of interest and stock recommendations: the effects of the global settlement and related regulations. Unpublished Working Paper, Washington University at St. Louis, MO, USA.
37. Krigman L., Shaw W., and Womack K. Why do firms switch underwriters?. Journal of Financial Economics 60 (2001) 245-284
38. Leland H. Insider trading: should it be prohibited?. Journal of Political Economy 100 (1992) 859-887
39. Lin D.Y., and Wei L.J. Robust inference for the Cox proportional hazards model. Journal of the American Statistical Association 84 (1989) 1074-1078
40. Lin H.-W., and McNichols M. Underwriting relationships, analysts' earnings forecasts, and investment recommendations. Journal of Accounting and Economics 25 (1998) 101-127
41. Ljungqvist, A., Malloy, C., Marston, F., 2009. Rewriting history. Journal of Finance, forthcoming.
42. Ljungqvist A., Marston F., Starks L., Wei K., and Yan H. Conflicts of interest in sell-side research and the moderating role of institutional investors. Journal of Financial Economics 85 (2007) 420-456
43. Ljungqvist A., Marston F., and Wilhelm W. Competing for securities underwriting mandates: banking relationships and analyst recommendations. Journal of Finance 61 (2006) 301-340
44. Loughran T., and Ritter J. Why has IPO underpricing changed over time?. Financial Management 33 (2004) 5-37
45. Mahoney P. Manager-investor conflicts in mutual funds. Journal of Economic Perspectives 18 (2004) 161-182
46. Malmendier U., and Shanthikumar D. Are small investors naïve about incentive?. Journal of Financial Economics 85 (2007) 457-489
47. Massa M., and Rehman Z. Information flows within financial conglomerates: evidence from the banks-mutual funds relationship. Journal of Financial Economics 89 (2008) 288-306
48. McNichols M., and O'Brien P. Self-selection and analyst coverage. Journal of Accounting Research 35 (1997) 167-199
49. Mehran H., and Stulz R. The economics of conflicts on interest in financial institutions. Journal of Financial Economics 85 (2007) 267-296
50. Meulbroek L. An empirical analysis of illegal insider trading. Journal of Finance 47 (1992) 1661-1699
51. Michaely R., and Womack K. Conflict of interest and the credibility of underwriter analyst recommendations. Review of Financial Studies 12 (1999) 653-686
52. Mola S., and Loughran T. Discounting and clustering in seasoned equity offering prices. Journal of Financial and Quantitative Analysis 39 (2004) 1-23
53. Nanda V., Wang J., and Zheng L. Family values and the star phenomenon: strategies of mutual fund families. Review of Financial Studies 17 (2004) 667-698
54. New York Law Journal, 2007. $125 million settlement in shareholders' actions against Merrill Lynch approved as fair, reasonable, 11 September.
55. New York Times, 2001. Buy, they say: but what do they do? IPO conflicts bedevil analysts. Morgenson, G., 27 May, p. 1.
56. New York Times, 2002. Don't shoot the analyst. Sernovitz, G., 15 November 15, p. 31.
57. O'Brien P., and Bhushan R. Analyst following and institutional ownership. Journal of Accounting Research 28 (1990) 55-76
58. O'Brien P., McNichols M., and Lin H.-W. Analyst impartiality and investment banking relationships. Journal of Accounting Research 43 (2005) 623-650
59. PR Newswire, 2002. Kaplan Fox seeks to recover losses for investors who purchased Merrill Lynch's Internet Infrastructure HOLDRS, 24 July.
60. Prentice R., Williams B., and Peterson A. On the regression analysis of multivariate failure time data. Biometrika 68 (1981) 373-379
61. Reuter J. Are IPO allocations for sale? Evidence from mutual funds. Journal of Finance 61 (2006) 2289-2324
62. Ritter J., and Zhang D. Affiliated mutual funds and the allocation of initial public offerings. Journal of Financial Economics 86 (2007) 337-368
63. Securities and Exchange Commission, 2001. Written testimony concerning conflicts of interest faced by brokerage firms and their research analysts. Unger, L., 31 July.
64. Sirri E., and Tufano P. Costly search and mutual fund flows. Journal of Finance 53 (1998) 1589-1622
65. Stickel S. Reputation and performance among security analysts. Journal of Finance 47 (1992) 1811-1836
66. Wall Street Journal, 2002a. After Enron, quarterly dividend takes center stage for utilities. Smith, R., 15 January, C1.
67. Wall Street Journal, 2002b. In uncertain market, dividends talk. Manager at Eaton Vance emphasizes steady income to ride out slow economy. Bogoslaw, D., 5 September, D9.
68. Wall Street Journal, 2003a. Stock analysts still put their clients first. Smith, R., 7 April, C1.
69. Wall Street Journal, 2003b. Where to look for dividends. As niche mutual funds launch and companies boost payouts, investors face new choices. Opdyke, J.D., 7 October, D1.
70. Wall Street Journal, 2003c. Morgan Stanley to settle with SEC. Solomon, D., Lauricella, T., 17 November, C9.
71. Wall Street Journal, 2003d. Dividend stocks could become favorites in '04. Ken Brown, December 29, C1.
72. Wall Street Journal, 2005. Citigroup asset-swap talks aim to avoid investor conflict. Berman, D.K., Pacelle, M., Lauricella, T., 2 June, C1.
73. Wall Street Journal, 2006. Merrill is near deal to acquire BlackRock stake. Berman, D.K., Smith, R., 13 February, A1.
74. Wall Street Journal, 2007. Moving the market: Improper-trading case settled. Bank of America to pay $26 million over claims research was misused. Bauerlein, V., Hughes, S., 15 March, C3.
75. Wall Street Letter, 2007. Pru analysts look to buy-side for soft landing. Schulz, M., 11 June.
76. Washington Post, 2007. Sell ratings remain a rarity. Onaran, Y., Harper, C., 9 December, F02.
77. Womack K. Do brokerage analysts' recommendations have investment value?. Journal of Finance 51 (1996) 137-167