Topic: Buy-Side Institutions and Industry Knowledge of Sell-Side Analysts

Speaker: Jinfan Zhang, Economist, International Monetary Fund

Date: December 29th (Tuesday)

Time: 10:00-11:30am  

Location: Building 4, Room 102

Language: English

Abstract:

Using novel and unique biographical data on sell-side analysts’ industry work experience and broker commissions derived from mutual fund clients, we find that buy-side funds allocate higher equity trading commissions to brokerage houses providing industry experienced analyst coverage on portfolio holding firms. Client funds generate higher abnormal holding returns, execute more profitable trades and exhibit modest bias on these stocks. For identification, we exploit a host of disruptions to research coverage emanating from analyst job changes, brokerage mergers, analyst retirements and deaths and find consistent results. Industry experienced analysts who have longer related industry work experience, professional connections to covered firms’ management, and all-star status and who cover firms moving more synchronously with industry fundamentals and firms with poor information environments confer greater benefits. The results are consistent with the notion that industry knowledge of sell-side analysts is important for brokerage firms as well as buy-side clients, highlighting the significant economic roles of analysts in capital markets.

About the speaker:

Jinfan Zhang is working for Monetary and Capital Market Department of International Monetary Fund as an Economist since September 2014. Previously, Dr. Zhang spent 2 years in the Cheung Kong Graduate School of Business as an Assistant Professor of Finance. He was also a research assistant of J.P. Morgan Fellow Program at Yale University from 2011 to 2012. He received a Ph.D. in Financial Economics from Yale University in 2013 and a Ph.D. in Telecommunications System and Technology from Tsinghua University in 2007. Dr. Zhang’s research interests include asset pricing, financial markets and institutions. He has articles published in the Review of Financial Studies, and IEICE Transactions on Communications, among others.