Working Paper: NBER ID: w30032
Authors: David Hirshleifer; Yushui Shi; Weili Wu
Abstract: We study here say-buy/whisper-sell behavior wherein analysts issue optimistic recommendations to attract retail investors while providing more accurate information to fund managers in private, sometimes resulting in fund managers selling the recommended stocks. We test whether fund managers return the favor using their votes for analysts in a Chinese “star analyst” competition. Managers are more likely to vote for analysts who exhibit greater “say-buy/whisper-sell” behavior toward these managers. This suggests that analysts reduce the accuracy of their public recommendations, thereby maintaining the value of their private advice to funds. Our findings help explain several empirical puzzles about analyst public recommendations.
Keywords: Equity Analysts; Information Asymmetry; Market Efficiency; Say-Buy-Whisper-Sell Behavior
JEL Codes: G12; G14; G2; G23; G24; G3; M41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| analysts' optimistic public recommendations (G24) | analysts' private communications to fund managers (G24) |
| whispersell behavior (C92) | fund managers voting for analysts (G34) |
| analysts' public recommendations accuracy (G24) | value of private advice (D14) |
| whispersell behavior (C92) | managers' voting decisions (D79) |
| poor post-recommendation performance of whispersell stocks (G17) | fund managers voting for analysts (G34) |