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Hedge funds and their prime broker analysts
Journal of Empirical Finance ( IF 3.025 ) Pub Date : 2021-03-19 , DOI: 10.1016/j.jempfin.2021.03.005
Sung Gon Chung , Manoj Kulchania , Melvyn Teo

Are sell-side analysts reluctant to go against the investment views of their hedge funds when these hedge funds are their prime brokerage clients? We show that prime broker analysts tend to upgrade stocks recently bought by their clients. For stocks with upgraded recommendations, post-announcement cumulative abnormal returns are significantly lower for those purchased by the prime brokerage clients. Our results are stronger with high-dollar-turnover clients who generate more trading commissions. We also find that a hedge fund with a large bet on a stock has a stronger incentive to pressure the fund’s prime brokers to issue a favorable recommendation on the stock. Results are not driven by stocks of firms with low analyst coverage or small size.



中文翻译:

对冲基金及其主要经纪人分析师

当这些对冲基金是其主要经纪客户时,卖方分析师是否不愿意反对其对冲基金的投资观点?我们显示,主要经纪分析师倾向于提升其客户最近购买的股票。对于具有升级建议的股票,主要经纪客户购买的股票公告后的累积异常收益要低得多。高营业额的客户产生更多的交易佣金,我们的结果会更强。我们还发现,对一只股票押注较大的对冲基金有较强的动力,可以迫使该基金的主要经纪人对股票发出有利的建议。业绩不是由分析师覆盖率较低或规模较小的公司的股票驱动的。

更新日期:2021-03-30
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