Do broker/analyst conflicts matter? Detecting evidence from internet trading platforms

0392174 - NHU-C 2014 RIV NL eng J - Článek v odborném periodiku
Hanousek, Jan - Kopřiva, František
Do broker/analyst conflicts matter? Detecting evidence from internet trading platforms.
International Review of Financial Analysis. Roč. 28, June (2013), s. 86-92. ISSN 1057-5219. E-ISSN 1873-8079
Grant CEP: GA ČR(CZ) GAP403/11/0020
Institucionální podpora: PRVOUK-P23
Klíčová slova: conflict of interest * dealers' market * emerging markets
Kód oboru RIV: AH - Ekonomie
Impakt faktor: 0.617, rok: 2013

We analyze the potential conflict of interest between analysts and brokers associated with each other. In contrast to the existing literature, we do not analyze prediction accuracy and/or biases in analyst recommendations. Instead, we focus our analysis on brokers and examine whether their behavior systematically differs before and after investment recommendations are released. The evolution and dynamics of brokers' quotes and trades are used to test for systematic trading patterns around the release of one's own investment recommendation. In the model we control for brokers' responses to other investment advices and employ a SUR estimation framework. Data from the Prague Stock Exchange are used to demonstrate our methodology. Finding significant and systematic differences in brokers' behavior, we conclude that misuse of investment recommendations is widespread.
Trvalý link: http://hdl.handle.net/11104/0221125