Hedge Fund GLG Partners: Research on Effect of Analyst Recommendations ~ market folly

Thursday, March 18, 2010

Hedge Fund GLG Partners: Research on Effect of Analyst Recommendations

UK based hedge fund GLG Partners is out with some intriguing research on the effect analyst ratings have on a stock. This is actually a follow-up to some previous commentary where they concluded the following:

- European analyst recommendations outperform
- 'Buy' recommendations outperform more consistently than 'Sell' recommendations
- A bunch of handpicked sell-side firms by GLG outperformed the rest of analyst recommendations in Europe

With that in mind, they move next to the topic of: Which analysts should you pay attention to? Simply put, they find that large broker 'buy' recommendations move junk stocks more significantly than any other category. They also find that 'buy' picks are generally more powerful than 'sell' picks. As one can imagine, stocks that are disliked take a beating when 'sell' recommendations are issued. Large brokers also have more of an impact when they put out a 'sell' on some of the most popular stocks.

Overall, some interesting research from GLG Partners, a hedge fund firm that was recently ranked 22nd on a list of the world's largest hedge funds. It's obvious that sell-side research and alerts have an impact on a stock price, it's just interesting to see it quantified. Things could get even more interesting if they had singled firms out and done a case by case study to determine which sell-siders had the most influence. It looks like we'll have to patiently wait for someone to generate such data.

Taken from GLG's website, embedded below is their look at what type of sell-siders you should pay attention to:

You can directly download a .pdf here.

For more insight from GLG Partners, we covered when Pierre Lagrange recently presented at a hedge fund panel. And for more of our coverage of the UK, head to our posts on positions hedge funds hold in the UK.

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