TY - JOUR

T1 - The performance of UK stock recommendation revisions: Does brokerage house reputation matter?

AU - Chen Su

AU - Zhang, Hanxiong

AU - Nathan Lael Joseph

PY - 2022/7/1

Y1 - 2022/7/1

N2 - Our study examines the impact of brokerage house (BH) reputation on the performance of investment strategies following stock recommendation revisions in the UK stock market. We develop two alternative proxies for BH reputation based either on the past positions on the annual Institutional Investor (II) All-Europe Research Team or on the past recommendation performance of BHs. We find that BH reputation proxied by the past II rankings has no significant impact on the recommendation performance, suggesting that the II rankings are largely “popularity contests”. However, BH reputation proxied by the past year recommendation performance of BHs has a significantly positive impact on the recommendation performance in the next year, implying that the recommendation performance of BHs in the UK market is persistent. The bootstrap simulations further confirm that the observed performance persistence could be due to BH skill rather than BH luck (i.e., random chance).

AB - Our study examines the impact of brokerage house (BH) reputation on the performance of investment strategies following stock recommendation revisions in the UK stock market. We develop two alternative proxies for BH reputation based either on the past positions on the annual Institutional Investor (II) All-Europe Research Team or on the past recommendation performance of BHs. We find that BH reputation proxied by the past II rankings has no significant impact on the recommendation performance, suggesting that the II rankings are largely “popularity contests”. However, BH reputation proxied by the past year recommendation performance of BHs has a significantly positive impact on the recommendation performance in the next year, implying that the recommendation performance of BHs in the UK market is persistent. The bootstrap simulations further confirm that the observed performance persistence could be due to BH skill rather than BH luck (i.e., random chance).

U2 - 10.1002/ijfe.2312

DO - 10.1002/ijfe.2312

M3 - Article

JO - International Journal of Finance and Economics

JF - International Journal of Finance and Economics

SN - 1099-1158

ER -