Abstract
Using broker level data we demonstrate that relatively optimistic and relatively pessimistic analyst earnings forecasts both generate trade for their brokerage firms. This relationship is found to be asymmetric as the influence of relatively optimistic analyst forecasts on own broker market share is larger than the influence of relatively pessimistic analyst forecasts. Furthermore, upgrades and downgrades in recommendations also generate significantly higher broker market share, suggesting that sell-side institutions are rewarded for providing new information to the market. This study also provides evidence for the first time on how different broker clienteles react to earnings forecast and stock recommendations. Greater trade volume is found to be associated with optimistic earnings forecasts and stock recommendations are stronger for analysts affiliated with retail brokerage firms than those affiliated with institutional brokerage firms.
Published Version
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