Are buy-side analysts inferior?
Buy-side analysts aren’t as good as sell-side analysts. At least not in the opinion of some researchers.
“…buy-side analysts made more optimistic and less accurate forecasts than their counterparts on the sell side,” according to “Buy-Side vs. Sell-Side Analysts’ Earnings Forecasts,” an article by Boris Groysberg, Paul Healy, and Craig Chapman of Harvard Business School in the July/August issue of the Financial Analysts Journal.
“The performance differences appear to be partially explained by the buy-side firm’s greater retention of poorly performing analysts and by differences in the performance benchmarks used to evaluate buy-side and sell-side analysts.”
Do you buy the authors’ conclusions?
As of August 19, there’s a poll on the right-hand side of this blog that will let you vote on the accuracy of buy-side vs. sell-side analysts. It’s a temporary poll, so vote now! If you think the issues are too complex to be addressed by a poll, please add your comments below.