Journal of Financial and Quantitative Analysis Vol. 41 No. 1 2006
Buy-Side Analysts, Sell-Side Analysts, and Investment Decisions of Money Managers
Abstract
We examine the role of financial analysts in forming institutional investors' investment decisions. In our model, a fund manager invests in a stock based on the optimal weighting of reports created by a biased sell-side analyst and an unbiased buy-side analyst. The manager puts a higher weight on the buy-side analyst's report when the quality of the buyside analyst's information relative to that of the sell-side analyst increases, or when the sell-side analyst's degree of bias or uncertainty about the bias increases. Utilizing a unique dataset of U.S. equity funds, we find evidence supporting our model predictions on how fund managers weigh buy-side research relative to sell-side and independent research.
- DOI
- 10.1017/s0022109000002428
- Volume
- 41
- Issue
- 1
- Pages
- 51-83
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref