Download the Adobe .pdf report on analyst bias.
The study from Dartmouth College titled Conflict of Interest and the Credibility of Underwriter Analyst Recommendations that makes the point clear:
Brokerage analysts frequently comment on and sometimes recommend companies that their firms have recently taken public. We show that stocks that underwriter analysts recommend perform more poorly than “buy” recommendations by unaffiliated brokers prior to, at the time of, and subsequent to the recommendation date. We conclude that the recommendations by underwriter analysts show significant evidence of bias. We show also that the market does not recognize the full extent of this bias. The results suggest a potential conflict of interest inherent in the different functions that investment bankers perform.
Download the Adobe .pdf report on analyst bias.
About the Author:
Kent L. Womack
The Amos Tuck School
Dartmouth College
