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영어

Analyst reports, which contain views on whether to buy or sell particular stocks for clients, usually include earnings forecasts, long-term growth forecasts, and /or stock recommendations. In general, analysts’ stock recommendations fall into one of five categories: strong buy, buy, hold, sell, or strong sell. Analysts revise their recommendations by upgrading or downgrading them when needed. The recommendation changes are commonly regarded as useful information and lead to changes in stock prices. Investors expect analysts to provide objective, unbiased, and accurate equity research reports based on the best of their knowledge. However, the literature has accumulated evidence that sell-side analysts’ forecasts are tainted and not objective. Sell-side analysts working for investment bank shave pressure to provide optimistic recommendations on firms that can provide business to the investment banks. Analysts working in brokerage houses also have pressure to provide optimistic recommendations to attract trading revenues because upgrades attract more business than downgrades due to restrictions on short selling. Consistent with this conflict of interest, previous literature has found that analysts affiliated with investment banks and brokers produce more optimistic earnings and are more likely to give buy recommendations. In addition, if some investors have access to the contents of upcoming analysts’ reports in advance, then they can take advantage of the superior information contained in those reports. Irvine, Lipson, and Puckett (2007) test the “tipping hypothesis” based on data on initial recommendations and document that brokerage firms provide the contents of affiliated analyst reports to important clients who generate large trading commissions before the information becomes public. We extend this line of research by examining the daily trading data on Korean stock recommendation changes from 2001 to 2010. The advantage of using Korean data is that we can obtain the daily trading volume by investor types for all stocks traded on the Korean Stock Exchange (KSE) and on the Korea Securities Dealers Automated Quotation (KOSDAQ). Our sample consists of 1,708 upgrades and 2,035 downgrades for 223 unique industrial firms. By analyzing investors’ trading data on the recommendation changes of analysts, we examine whether information asymmetry exists among different groups of investors, individuals, domestic buy-side institutions, and foreign investors. Unlike individual investors, institutions frequently communicate with brokerage firms, investment banks, and asset management firms to acquire information, which makes it possible for them to access analysts’ reports. In addition, institutions are more capable of acquiring and processing information than individuals. We thusconjecture that domestic buy-side institutions are better informed than individuals on upcoming recommendation changes. We also investigate whether foreigners have an informational advantage compared to domestic investors on the upcoming recommendation changes. Previous studies provide inconclusive evidence that foreigners perform better than domestic investors in trading stocks. Using Korean data, Choe, Kho, and Stulz (2005) find no evidence that foreign investors perform better than domestic institutions. Our analysis shows that stock prices increase before analysts’ recommendation upgrades, whereas upcoming downgrades do not cause stock prices to decrease before the information release. We then analyze the standardized trade imbalance (STI) to examine the difference in trading activities by individuals, domestic institutions, and foreigners before recommendation changes. Over the period of days -5 to -1, the STI by domestic buy-side institutions is 0.43 before upgrades and -.35 before downgrades, and the STIs are significantly different from zero at the 1% confidence level. However, the STIs by individuals and foreigners before recommendation changes are not statistically different from zero. These results indicate that domestic buy-side institutions buy (sell) stocks in anticipation of an upgrade (downgrade), whereas individual investors and foreign investors do not trade stocks based on information. We also find that trade imbalances by the institutions are positively related to abnormal returns over days 0 to 5 after the announcements of recommendation changes. This evidence is consistent with our argument that domestic buy-side institutions take advantage of their superior information on analyst recommendation changes over the short-term. Our paper adds to the literature by providing evidence of the short-term informational advantage of domestic buy-side institutions over other investors on analysts’ recommendation changes based on high-frequency data from Korea. The evidence shows that domestic institutions predict the direction of analysts’ recommendation changes and reflect this information in their stock trading, which is indirectly consistent with Irvine, Lipson, and Puckett’s (2007) finding. We also contribute to the growing literature on foreign investors’ trading in emerging markets. We find that foreign institution trading is not characteristic of analysts’ recommendation changes and does not predict stock returns. This shows that foreign institutions do not have an informational advantage compared to local institutions on specific events.

한국어

본 연구는 국내 증권회사 소속 애널리스트 투자의견 변경 이전에 이루어지는 주식거래에서 기관투자자의 단기적인 정보우위 여부를 검증한다. 2001년에서 2010년까지의 기간 동안 한국거래소 유가증권시장에 상장된 기업 중 애널리스트가 투자의견을 변경한 기업을 대상으로 분석을 진행한 본 연구의 주요 결과는 다음과 같다. 투자의견 상향조정 기업의 경우 관련 정보의 신속한 반영으로 상향조정 이전에 주가가 상승하는 반면, 하향조정 기업의 경우에는 여러 가지 시장 제약에 따른 부정적인 정보의 전달 지연으로 하향조정 이전에 주가가 하락하지 않는다는 결과를 도출하였다. 또한, 국내 매수측(buy-side) 기관투자자는 기업에 대한 우수한 분석능력을 바탕으로 사전에 애널리스트의 투자의견 변경 정보와 동일한 방향으로 거래를 수행하여, 이들의 거래불균형은 투자의견 변경 시 주식수익률과 정(+)의 관계가 있다는 것을 발견하였다. 반면, 개인투자자와 외국인 투자자는 애널리스트 투자의견 변경 정보와 무관하거나 반대의 방향으로 거래를 행하고 있다. 이러한 결과는 애널리스트 투자의견 변경일 이전에 기관투자자가 정보우위를 통해 방향성 있는 거래를 수행한다는 본 연구의 주장과 일치한다.