Institutional holdings and analysts’ stock recommendations

Prior studies document that institutional investors outperform the mar- ket. We investigate whether this superior performance is partly derived from institutional investors use of sell-side analysts stock recommenda- tions. First, we find that the quarterly change in institutional ownership is posit...

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Main Authors: CHENG, Qiang, CHEN, Xia
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Language:English
Published: Institutional Knowledge at Singapore Management University 2006
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Online Access:https://ink.library.smu.edu.sg/soa_research/828
https://ink.library.smu.edu.sg/context/soa_research/article/1827/viewcontent/SSRN_id309842.pdf
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spelling sg-smu-ink.soa_research-18272024-01-08T07:45:28Z Institutional holdings and analysts’ stock recommendations CHENG, Qiang CHEN, Xia Prior studies document that institutional investors outperform the mar- ket. We investigate whether this superior performance is partly derived from institutional investors use of sell-side analysts stock recommenda- tions. First, we find that the quarterly change in institutional ownership is positively correlated with consensus recommendations. After control- ling for other determinants of institutional holdings, the quarterly change in institutional ownership is on average 0.90 percent higher for firms with favorable recommendations than for those with unfavorable recommendations. Second, using large trades to proxy for institutional trading, we find that there are more buyer-initiated than seller-initiated large trades around favorable recommendations and vice versa for unfavorable recommendations. Lastly, we find that the change in institu- tional ownership that is explained by stock recommendations is associ- ated with positive abnormal returns in the future, about 4.2 percent per year. Overall, these results indicate that institutional investors trade upon stock recommendations and that such trading contributes to their superior performance. 2006-10-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/828 info:doi/10.1177/0148558X0602100405 https://ink.library.smu.edu.sg/context/soa_research/article/1827/viewcontent/SSRN_id309842.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University Financial analysts institutional trading stock recommendations Accounting Corporate Finance
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Financial analysts
institutional trading
stock recommendations
Accounting
Corporate Finance
spellingShingle Financial analysts
institutional trading
stock recommendations
Accounting
Corporate Finance
CHENG, Qiang
CHEN, Xia
Institutional holdings and analysts’ stock recommendations
description Prior studies document that institutional investors outperform the mar- ket. We investigate whether this superior performance is partly derived from institutional investors use of sell-side analysts stock recommenda- tions. First, we find that the quarterly change in institutional ownership is positively correlated with consensus recommendations. After control- ling for other determinants of institutional holdings, the quarterly change in institutional ownership is on average 0.90 percent higher for firms with favorable recommendations than for those with unfavorable recommendations. Second, using large trades to proxy for institutional trading, we find that there are more buyer-initiated than seller-initiated large trades around favorable recommendations and vice versa for unfavorable recommendations. Lastly, we find that the change in institu- tional ownership that is explained by stock recommendations is associ- ated with positive abnormal returns in the future, about 4.2 percent per year. Overall, these results indicate that institutional investors trade upon stock recommendations and that such trading contributes to their superior performance.
format text
author CHENG, Qiang
CHEN, Xia
author_facet CHENG, Qiang
CHEN, Xia
author_sort CHENG, Qiang
title Institutional holdings and analysts’ stock recommendations
title_short Institutional holdings and analysts’ stock recommendations
title_full Institutional holdings and analysts’ stock recommendations
title_fullStr Institutional holdings and analysts’ stock recommendations
title_full_unstemmed Institutional holdings and analysts’ stock recommendations
title_sort institutional holdings and analysts’ stock recommendations
publisher Institutional Knowledge at Singapore Management University
publishDate 2006
url https://ink.library.smu.edu.sg/soa_research/828
https://ink.library.smu.edu.sg/context/soa_research/article/1827/viewcontent/SSRN_id309842.pdf
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