The stock selection and performance of buy-side analysts

We examine the selection and performance of stocks recommended by analysts at a large investment firm relative to those of sell-side analysts during the period mid-1997 and 2004. The buy-side firm's analysts issued less optimistic recommendations for stocks with larger market capitalizations and lower return volatility than their sell-side peers, consistent with their facing fewer conflicts of interest and having a preference for liquid stocks. Tests with no controls for these effects indicated ...