Analyst Tipping: Evidence on Finnish Stocks

Posted: 7 Dec 2017 Last revised: 12 May 2020

See all articles by Ruiqi Mao

Ruiqi Mao

University of Sydney Business School

Reuben Segara

University of Sydney Business School; Financial Research Network (FIRN)

P. Joakim Westerholm

University of Sydney Business School

Date Written: December 1, 2017

Abstract

Market analysts typically present their views on firms through publicly released recommendation reports and revisions, in which they ‘upgrade’ or ‘downgrade’ their stock picks. Traders can earn substantial profits if they have access to the information in these reports in advance of their public release. Analysts have an incentive to tip their major clients by earning commission on informed trades. Using data from the Nasdaq Helsinki between 2001–2014, we find evidence of analyst tipping. Trading patterns reveal that domestic institutional investors buy recommended stocks from four days prior to upgrades and sell from one day prior to downgrades. We also find evidence that the Market Abuse Directive slightly reduced analyst tipping in the two years following its implementation.

Keywords: analyst upgrades, analyst downgrades, tipping

JEL Classification: G14, G15, G24

Suggested Citation

Mao, Ruiqi and Segara, Reuben and Westerholm, P. Joakim, Analyst Tipping: Evidence on Finnish Stocks (December 1, 2017). International Review of Financial Analysis, Vol. 66: 1-12. (2019), Available at SSRN: https://ssrn.com/abstract=3081664 or http://dx.doi.org/10.2139/ssrn.3081664

Ruiqi Mao

University of Sydney Business School

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Reuben Segara (Contact Author)

University of Sydney Business School ( email )

Sydney
Australia
+61 2 9351 8790 (Phone)
+61 2 9351 6461 (Fax)

HOME PAGE: http://www.sydney.edu.au/business/about/our-people/academic-staff/reuben-segara.html

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

P. Joakim Westerholm

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

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