Affiliated mutual funds and analyst optimism

By Simona Mola, Massimo Guidolin. 2007

187 citations recorded by the source corpus.

This paper extends the literature on analyst optimism. Our analysis of a large sample of recommendations issued from 1995 through 2006 indicates that sell-side analysts are likely to assign frequent and favorable ratings to a stock after the analysts' affiliated mutual funds invest in that stock. Controlling for a number of variables, including the ties between analysts and investment banks, we find that the greater the portfolio weight of a stock in the fund family, the more optimistic the stock ratings from affiliated analysts become. Since 2002, analysts' optimism on stocks held by affiliated mutual funds has declined. However, an analyst's decision of upgrading a stock to a "strong buy" rating is still significantly associated with the portfolio weight of that stock in the fund family.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/95f62092079df6f06ccb0e00b7ba6ca30d6667ba

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Kam C. Chan
2. Nianhang Xu
3. Tao Chen
4. Chen Lin
5. Jarrad Harford
6. Zhihong Yi
7. Xuanyu Jiang
8. Micah S. Officer

In Finance

1. Chen Lin
2. Zhihong Yi
3. Jarrad Harford
4. Tao Chen
5. Kam C. Chan
6. Nianhang Xu
7. Xuanyu Jiang
8. Micah S. Officer

Citations in the corpus

• Analyst coverage, optimism, and stock price crash risk: Evidence from China (2013, background): “In addition, since 2002, analyst tendency toward optimism has persisted and stock recommendations are still biased upward (Mola and Guidolin, 2009).”
• Customer Satisfaction, Analyst Stock Recommendations, and Firm Value (2010, unknown): “Mola and Guidolin 2009 !”
• Do Analysts Matter for Governance? Evidence from Natural Experiments (2015, background): “…clients, which results in an optimistic bias in earnings forecasts (e.g. Das et al., 1998; Gu and Wu, 2003; O’Brien et al., 2005; Ke and Yu, 2006; Mola and Guidolin, 2009; Groysberg et al., 2011).3 There is a striking paucity of papers that have explicitly tested for a corporate governance role…”
• Friends in Need Are Friends Indeed: An Analysis of Social Ties between Financial Analysts and Mutual Fund Managers (2018, unknown): “(Mola and Guidolin, 2009) and allocation of trading commissions by the fund company (Firth, Lin, Liu, and Xuan, 2013; Gu, Li, and Yang, 2013).”