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

0392390 - NHU-C 2014 RIV CZ eng C - Conference Paper (international conference)
Hanousek, Jan - Kopřiva, František
Do broker/analyst conflicts matter? Detecting evidence from internet trading platforms.
Proceedings of 30th International Conference Mathematical Methods in Economics. Karviná: Silesian University in Opava, School of Business Administration in Karviná, 2012 - (Ramík, J.; Stavárek, D.), s. 255-259. ISBN 978-80-7248-779-0.
[30th International Conference Mathematical Methods in Economics 2012. Karviná (CZ), 11.09.2012-13.09.2012]
R&D Projects: GA ČR(CZ) GAP403/11/0020
Institutional support: PRVOUK-P23
Keywords : dealers’ market * emerging markets * informed trading
Subject RIV: AH - Economics
http://mme2012.opf.slu.cz/proceedings/pdf/044_Hanousek.pdf

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 advice 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.
Permanent Link: http://hdl.handle.net/11104/0221262