Review of Financial Studies Vol. 37 No. 5 2024

Are Analyst “Top Picks” Informative?

Justin Birru¹; Sinan Gokkaya²; Xi Liu³; René M. Stulz⁴

¹ Fisher College of Business, The Ohio State University , USA · ² Phil and Pat Muck College of Business, Ohio University , USA · ³ Farmer School of Business, Miami University , USA · ⁴ Fisher College of Business, The Ohio State University , USA , NBER, and ECGI

Abstract

Following the Global Settlement, analysts extensively use a top pick designation allowing for greater granularity of information among buy recommended stocks, but conflicts of interest can potentially influence this designation. Examining a novel sample of top picks, we find that a calendar-time portfolio of top picks generates an abnormal performance of 17.6% per year. Top picks have greater investment value than do buy recommendations and alternative analyst investment strategies. Both institutional and retail investors trade in response to top picks. However, only institutional investors appear to identify top picks that have greater investment value when they are announced.

DOI

10.1093/rfs/hhad099

Volume

37

Issue

5

Pages

1538-1583

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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