Do Analysts Generate Trade for Their Firms? Evidence from the Toronto Stock Exchange

Posted: 23 May 2001

Abstract

It has generally been assumed that potential commission revenue is an important determinant of a sell-side analyst's decision of what firms to cover and what information to publicly release. However, because stock volume has not been disaggregated on a brokerage-firm level, uncertainty remains regarding the economic importance of the relation between analyst coverage and brokerage-firm volume. Using a unique data set that identifies the broker(s) involved in each trade, I find that brokerage volume is significantly higher in covered stocks than in uncovered stocks. On average, brokers increase their market share in covered stocks by 3.8% relative to uncovered stocks.

Keywords: Capital markets, analyst coverage, brokerage-firm trading volume

JEL Classification: G24, G14, G29

Suggested Citation

Irvine, Paul J., Do Analysts Generate Trade for Their Firms? Evidence from the Toronto Stock Exchange. Available at SSRN: https://ssrn.com/abstract=262115

Paul J. Irvine (Contact Author)

Neeley School of Business ( email )

Fort Worth, TX 76129
United States

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