Hey guys... so actually I have been writing my thesis/upper-writing class/the paper I need to write to graduate. The topic I chose is "stock recommendation bias and bank's affiliation"
I am a Math and Econ double major and I used a lot of Econometrics data estimations. (Econ class)
My data tells me the following: (I used EViews)
If a bank is a lead underwriter during a company's IPO, then the bank is LESS likely to issue a favorable rating for the target company (I call this company the 'target company') A bank's size does not matter. Either does a star analyst. If a bank has a commercial banking division, then the bank is LESS likely to give favorable recommendation. Those findings conform to previous studies. I can put my citations page here if you guys want.
What my paper adds is about the tech sector. I assume that banks/independent research firms usually give favorable ratings to tech companies.
It turns out there is a negative relationship between tech stocks and recommendation prices... which is weird.
Any thoughts?
(I count Amazon as a tech company)
Not sure. That's interesting to note how your data says that lead underwriters for an IPO are less likely to issue favourable ratings. In my experience, its usually vice versa. Sellside ER tends to positively bias stock ratings with companies they want to do business with, or already have an existing relationship with. Sellside ER is often very skewed and used as another platform to strengthen the relationship with clients.
Not sure as to why the negative correlation between tech company performance and recommendations; I would guess just an output of most sellside analysts being bullish and tech companies being riskier than other industries as a whole
Quia iste quae nostrum qui quaerat et. Quia non odio sapiente voluptas expedita voluptas. Dolor similique corporis quo voluptas quo consequatur velit. Nam quo soluta ratione reiciendis. Quasi quia sint et dignissimos nesciunt explicabo. Sit deleniti quo vel est delectus. Et ut eligendi labore qui hic officiis est aliquam.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...