It’s not you - analysts really are getting younger
Equities research teams seldom share the limelight with their dealmaking investment banking colleagues who bring in the fees. But new research has shone a light on how to identify the best analysts in an often unheralded industry, which has fallen victim to changing regulation, leaner resources, and a dearth of experienced talent.
UBS’ trading desk pictured here utilises research from a team covering 230 stocks across Australia and New Zealand. Louise Kennerley
The Journal of Financial and Quantitative Analysis found there were significant differences among sell-side analysts who held longer conviction in their stock recommendations versus those who flip-flopped more frequently. Analysts who change recommendations (buy, sell, or hold) less often are likely to generate greater returns for investors, the research found.
And, analysts who take their time before adjusting their view on a stock consider the whole picture of corporate news, earnings reports and regulatory filings. They are also likely able to interpret this information better than non-experts, the research found.
“Sell-side analysts are… best-placed to know what is factored into a share price by virtue of their position servicing investors,” said Craig Stafford, the head of research at Barrenjoey Partners.
The researchers sampled analysts’ work from 1996 to 2013 and divided them into three groups: slow revisers, average revisers and fast revisers. The quickest revisers were deemed to change their recommendations every six months, while the slow burners typically changed their view every 20 months.
“You can be helpful by doing genuine analysis and work out how a company or industry works. Or you can try and grab the attention of investors by making a lot of
Read more on afr.com
