The influence of buy-side analysts on mutual fund trading |
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| Institution: | 1. Monash Business School, Caulfield East, VIC 3145, Australia;2. NYU Stern School of Business, New York, NY 10012, United States;3. Department of Finance, University of Melbourne, Melbourne, VIC 3010, Australia;4. Division of Accounting and Finance, Alliance Manchester Business School, Manchester M15 6PB, United Kingdom;5. Department of Accounting and Finance, Lancaster University Management School, Lancaster LA1 4YX, United Kingdom |
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| Abstract: | We present evidence on the trading and performance impact of buy-side analysts. Using data provided by a large global asset manager, we relate buy-side analysts’ recommendations to fund transactions on a daily basis. We show that buy-side analysts significantly influence trading decisions: Fund managers strongly follow recent recommendation revisions, even after controlling for other trading determinants. Positive abnormal returns to buy-side analysts’ revisions are also reflected in the performance of mutual fund trades: Trades triggered by buy-side recommendations have higher returns than other trades. Overall, the impact of buy-side analysts is more pronounced than that of sell-side analysts. |
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| Keywords: | Buy-side analysts Analyst recommendations Mutual funds Investment decisions Investment performance |
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