Melbourne Accounting Research Seminar - Wen He

Professor Wen He from Monash University will present a MARS seminar.

Topic: Do Brokers Manage the Distribution of Stock Recommendations?

Abstract: This study examines whether and how brokers manage the distribution of their stock recommendations. We document that in a quarter if a broker’s percentage of buy recommendations in the first two months is substantially higher than the historical average, the broker issues significantly fewer buy recommendations in the third month. This evidence becomes more pronounced after 2002 when brokers are required to publicly disclose their recommendation distributions. Exploring the methods, we find evidence suggesting that brokers may alter recommendation initiations and reiterations, and shift recommendations between adjacent quarters to manage the distribution. Investors appear to be able to unravel the distribution management and respond to the recommendations rationally.

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