1. INTRODUCTION & RESEARCH QUESTION The Global Research Analyst Settlement is an agreement between the Securities and Exchange Commission (SEC) and ten of the leading investment banks, it was announced April 28, 2003. The agreement came to fruition after vast investigations into possible conflicts of interests amongst security analysts working at investment banks. This agreement lead Barber, Lehavy and Trueman to write the paper; Comparing the stock recommendation performance of investment banks and independent research firms. The agreement spurred two important questions amongst the authors: (1) are the recommendations from independent research firms (IR) superior to recommendations from investment banks (IB); (2) was the implicit …show more content…
Clarke et al. (2004) researched this issue as well and concluded the long-term average abnormal returns for upgrades issued by IR, IB and brokerages are insignificantly different from each other; downgrades as well. Cliff (2004) found buy recommendations from IR significantly outperformed those of IB, and sell recommendations underperformed. Lin et al. (2005) examined time patterns rather than performance. Concluding, IB analysts are significantly slower to revise their buy and hold recommendations. However, the evidence is not as strong for downgrades from strong buy. While these papers helped shed light on an important topic there were holes within their analysis. Clarke et al. (2004) analyze abnormal returns for bull and bear market periods for stocks with IB business near the time of recommendation issuance. Additionally, a 250-day holding period was used for all recommended stock, with no regard for a change in recommendation or if it was dropped altogether. Moreover, Cliff (2004) offers no contrasts of abnormal returns between the bull and bear market stages or for firms with or without recent securities offerings. Also, there is no examination of non-leading IB analyst recommendations. Therefore, Barber et al. (2007) contribute to previous literature in a number of ways. Firstly, providing empirical backing for the Global Research Analyst Settlement; IB and IR
The weekly performance of IBM stock presented a contestant growth. One highlight of the falling of stock price in the 6th week in the investment period was when IBM presented the 3rd quarter financial report. The investors weren’t satisfied with the profit report which they expected to be better especially when other IT companies were doing well in the 3rd quarter. One mistake I made was that I didn’t follow closely to the financial report of the company; therefore, I missed the peak of the stock price. From this experience, I learned that financial reports and current news are important indicators of the stock price. By following closely to the current event and analyzing the financial report, investors can maximize the profit and also become more familiar to the market.
After levering the equity beta, the asset beta of the firms are calculated. As mentioned we think that the three discount brokerages (highlighted in green) should be used as comparables for Ameritrade. The average asset beta of the three firms is 1.386. As a comparison the investment services firms have average asset beta of 0.603 and the one internet company (Mecklermedia) for which enough historical data is
The stock market has always intrigued me and I have since been eager to learn more about it. Starting back in January of this year, I ordered three textbooks on stock trading to become more informed on the subject. After reading these books, I gained further insight on stock trading which led me to open my own brokerage account where I could buy and sell stocks. I started by playing a stock simulation which was very similar in concept to StockTrak, a program we used in this class. I found that this helped provide me with a hands on experience which helped familiarize me with stock trading and learning how to manage and use my money efficiently. I continued to play this simulation for about two months and during this time my portfolio grew about 4%, which provided me a confidence boost and motivated me to invest in my real money into the stock market. In March of 2015, I officially began trading in the stock market and I continued to learn along the way. As of now, I have roughly nine months of stock trading experience. As stated previously, I have always had in interest in the stock market, but I never acted upon it until as recently as earlier this year. My interest in the stock market was peaked because I enjoy taking risks and the stock market
The five events are correlated and occurring over approximate five months from 18th August 2010 to 13th December 2010.
Here we choose VW NYSE, AMEX, and NASDAQ data as market returns, because it’s value weighted and more reliable. The results show CSC’s equity beta = 2.27, QRG’s equity beta = 1.79.
Hence, the leadership style of Reed Hastings is extremely important for the purpose of this report and will be the key focus of the research as well. In the beginning of the year 2005, the analysts of Wedbush Securities Stock had place a price targeting at 3 dollars, the trading of which was being done at the price of approximately 11 dollars (Loftus
Bloomberg 's Consensus Rating system offers an convenient way for users to get a quick understanding of sell-side analyst expectations of a company 's future stock movement. If a company shows a consensus rating of 4.7 on the function {ANR}, what can this tell us about sell-side expectations of the stock?
For this assignment, use the Internet to research high-risk investment brokerage firms that have been indicted or convicted of ethical violations to provide insight and understanding of this market segment.
Brandt Cornell’s paper “Is the response of analyst to information consistent with fundamental valuation?” reveals that analyst recommendations are pro cyclical. As bad news arrives and the underlying price of the firm’s stock goes down , analyst downgrade company , the opposite effect arises when good news arrives. As Cornell
This document is authorized for use only by Yen Ting Chen in FInancial Markets and Institutions taught by Nawal Ahmed Boston University from September 2014 to December 2014.
Hicks, J. Arii, K. Rothman, S. (2012). Taking sides: Selected articles for discussion. Singapore: McGraw-Hill companies
As a PhD candidate in Finance, I want to continue my research on earnings revision and earnings surprises as well as investigate other factors of return predictability related to size, profitability, and momentum. In addition, my other research interests are in (1) investments, (2) hedge funds and mutual funds, and (3) applications of machine learning in finance.
The historic average returns from 1950 to 1996 and from 1929 to 1996 are given In Exhibit 3. We chose the latter time period as we considered it would give us a more reliable estimate of the risk-free rate by discounting both the Second World War and the Great Depression. It is necessary to evaluate the expected length of the project and utilize a risk free rate applicable for the same time period. Ameritrade is investing $100 million dollars in technology, which is considered a long-term investment, in order to become the largest brokerage firm. We consider their
From September 3rd, 2015 to October 28th, 2015, our group was given the opportunity to manage an investment portfolio, with the goal of maximizing the value of the portfolio through acquiring, holding, and selling stock. The beginning cash balance of the portfolio was $100,000, and our group had the ability to make up to 500 trades. During this time period, our group made 20 stock purchases and sold stock twice. At the close of business on October 28, 2015, the value of our group’s portfolio increased from $100,000 to $106,785.33, yielding a return of 6.78% (((106785.33/100,000)-1) x 100)). In comparison to the S&P 500 returned at 7.16% and the Dow Jones having a return of 8.65% (Yahoo).
As indicated by the case study S&P 500 index was use as a measure of the total return for the stock market. Our standard deviation of the total return was used as a one measure of the risk of an individual stock. Also betas for individual stocks are determined by simple linear regression. The variables were: total return for the stock as the dependent variable and independent variable is the total return for the stock. Since the descriptive statistics were a lot, only the necessary data was selected (below table.)