The Influence of Buy-Side Analysts on Mutual Fund Trading

Posted: 21 Oct 2010 Last revised: 8 Jan 2015

See all articles by Stefan Frey

Stefan Frey

Centre for Financial Research (CFR); Leibniz Universität Hannover

Patrick Herbst

University of Stirling - Department of Accounting and Finance

Date Written: July 13, 2013

Abstract

We present evidence on the trading and performance impact of buy-side analysts. Using data provided by a large global asset manager, we relate buy-side analysts' recommendations to fund transactions on a daily basis. We show that buy-side analysts significantly influence trading decisions: Fund managers strongly follow recent recommendation revisions, even after controlling for other trading determinants. Positive abnormal returns to buy-side analysts' revisions are also reflected in the performance of mutual fund trades: Trades triggered by buy-side recommendations have higher returns than other trades. Overall, the impact of buy-side analysts is more pronounced than that of sell-side analysts.

Keywords: Buy-Side Analysts, Analyst Recommendations, Mutual Funds, Investment Decisions, Investment Performance

JEL Classification: G23, G11, G29, M41

Suggested Citation

Frey, Stefan and Frey, Stefan and Herbst, Patrick, The Influence of Buy-Side Analysts on Mutual Fund Trading (July 13, 2013). Journal of Banking and Finance, Volume 49, December 2014, Pages 442–458, Available at SSRN: https://ssrn.com/abstract=1694978 or http://dx.doi.org/10.2139/ssrn.1694978

Stefan Frey

Centre for Financial Research (CFR) ( email )

Albertus-Magnus Platz
Cologne, 50923
Germany

Leibniz Universität Hannover

Koenigsworther Platz 1
30167 Hannover, DE 30167
Germany

Patrick Herbst (Contact Author)

University of Stirling - Department of Accounting and Finance ( email )

Stirling, Scotland FK9 4LA
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
1,203
PlumX Metrics