Analyst Behavior Following IPOs: The "Bubble Period" Evidence

We examine over 7400 analyst recommendations made in the yearafter going public for IPOs from 1999 to 2000. Initiations ofcoverage at the end of the quiet period come almost exclusivelyfrom affiliated analysts, whereas initiations afterward arepredominantly from unaffiliated analysts. Contrary to previousfindings, we find no evidence that the market discounts recommendationsfrom affiliated analysts once we control for recommendationcharacteristics and timing. Moreover, analyst coverage in thefirst year is not affected by underpricing, and after the flurryof initiations at the end of the quiet period, the number ofanalysts covering a firm during the following 11 months is unrelatedto the number of managing underwriters. (JEL G12, G14, G24)