Abstract
We examine whether broker recommendations add value in Europe. In contrast to extant research, we focus on a non-U.S. sample that post-dates the important regulatory changes of 2003/4. Our analysis suggests that European brokers’ recommendations outperform a standard benchmark during the 2005-2009 period. Trade ideas from research sales-people, the people in daily contact with fund managers, provide better performance than recommendations directly from research departments. Our results also indicate that brokers are far better at selecting long ideas than short ideas, and have been for many years. We also show that a simple strategy based on broker ideas would comfortably be in the top quartile of UK pan-European mutual funds for each complete year for which we have data.
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