Market structure, informed trading, and analysts' recommendations

Sok Tae Kim; Ji-chai Lin; Myron B. Slovin

doi:10.2307/2331235

Market structure, informed trading, and analysts' recommendations

Sok Tae Kim, Ji-chai Lin, Myron B. Slovin

Research output: Journal article publication › Journal article › Academic research › peer-review

54 Citations (Scopus)

Abstract

We examine stock price behavior in response to initial coverage, buy recommendations that are pre-released to important clients before the stock market opens, and find a strong positive valuation effect at the open. On average, it takes five minutes of trading for NYSE/AMEX stocks and 15 minutes for NASDAQ stocks to reflect the private information contained in these analyst recommendations, so when informational asymmetry is high, the centralized call market is more efficient than a competitive, but fragmented dealer market. Public news release leaves share prices unaltered. Overall, competition among informed traders causes private information to be rapidly incorporated into stock prices.

Original language	English
Pages (from-to)	507-524
Number of pages	18
Journal	Journal of Financial and Quantitative Analysis
Volume	32
Issue number	4
DOIs	https://doi.org/10.2307/2331235
Publication status	Published - 1 Jan 1997
Externally published	Yes

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics

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10.2307/2331235

Cite this

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Market structure, informed trading, and analysts' recommendations

Abstract

ASJC Scopus subject areas

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