Corvinus
Corvinus

Could crowdsourced financial analysis replace the equity research by investment banks?

Kommel, Karl Arnold and Sillasoo, Martin and Lublóy, Ágnes (2018) Could crowdsourced financial analysis replace the equity research by investment banks? Working Paper. Corvinus University of Budapest Faculty of Economics, Budapest.

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A revised version of this paper has been published in Finance Research Letters: Karl Arnold Kommel, Martin Sillasoo, Ágnes Lublóy. (2018). Could crowdsourced financial analysis replace the equity research by investment banks? Finance Research Letters. Published online ahead of print 11 August 2018. doi: https://doi.org/10.1016/j.frl.2018.08.007

Abstract

Equity research is gaining popularity in crowd-sourced information sharing platforms. This study analyses S&P 100 companies stock recommendations and user-contributed articles published on Seeking Alpha platform over a three-year period; and investigates whether investment banks’ rating consensus or the sentiment of single-ticker articles published by Seeking Alpha contributors can predict future abnormal returns more accurately. We find that both analyst groups underperform the market. Trading strategies based on the sentiment of the opinion articles perform worse than trading strategies designed around the recommendations of security analysts. Analyst recommendations are expected to remain relevant, there is no immediate pressure from crowd-sourced equity research for changing the business model.

Item Type:Monograph (Working Paper)
Series Name:Corvinus Economics Working Papers - CEWP
Series Number / Identification Number:2018/03
Uncontrolled Keywords:stock recommendation, investment bank, crowdsourced financial analysis, sentiment, stock returns
JEL classification:C22 - Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
G11 - Portfolio Choice; Investment Decisions
G14 - Information and Market Efficiency; Event Studies; Insider Trading
G24 - Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
Subjects:Finance
ID Code:3733
Deposited By: Ádám Hoffmann
Deposited On:24 Oct 2018 10:47
Last Modified:24 Oct 2018 10:47

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