Worth the Hype? The Relevance of Paid-For Analyst Research for the Buy-and-Hold Investor

• 成果类型: Article
• 署名作者: Billings, Bruce K.; Buslepp, William L.; Huston, G. Ryan
• 署名单位: State University System of Florida; Florida State University; Texas Tech University System; Texas Tech University; State University System of Florida; University of South Florida
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-50681
• 发表日期: 2014
• 页码: 903-931
• 关键词: EARNINGS FORECASTS; INFORMATION; recommendations; BIAS

摘要

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.