Worth the hype? the relevance of paid-for analyst research for the buy-and-hold investor

• Autores: Bruce K. Billings, William L. Buslepp, G. Ryan Huston
• Localización: Accounting review: A quarterly journal of the American Accounting Association, ISSN 0001-4826, Vol. 89, Nº 3, 2014, págs. 903-931
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • The SEC Advisory Committee on Smaller Public Companies recommends paid-for research to fill the void created by declining sell-side coverage. Potential conflicts of interest inherent in paid-for research challenge this recommendation. We evaluate whether paid-for research provides value to investors or merely reflects hype. Analyses of one- and two-year-ahead paid-for earnings forecasts fail to identify significant bias. Using a portfolio approach, favorable (unfavorable) paid-for recommendations yield positive (negative) stock returns at release, with upward (downward) drift over the following year. Regressing future stock returns on recommendations and valuation estimates using paid-for analysts' forecasts yields similar results. Further, results fail to indicate significant differences in paid-for and matched sell-side research. Overall, our evidence suggests that paid-for research provides relevant information for the buy-and-hold investor that is comparable to that of matched sell-side research, providing empirical support for the SEC Advisory Committee recommendation.