Worth the hype the relevance of paid-for analyst research for the buy-and-hold investor

Bruce K. Billings, William L. Buslepp, G. Ryan Huston

Research output: Contribution to journalArticlepeer-review

12 Scopus citations


The SEC Advisory Committee on Smaller Public Companies recommends paid-for research to fill the void created by declining sell-side coverage. Potential conflicts of interest inherent in paid-for research challenge this recommendation. We evaluate whether paid-for research provides value to investors or merely reflects hype. Analyses of one-and two-year-ahead paid-for earnings forecasts fail to identify significant bias. Using a portfolio approach, favorable (unfavorable) paid-for recommendations yield positive (negative) stock returns at release, with upward (downward) drift over the following year. Regressing future stock returns on recommendations and valuation estimates using paid-for analysts' forecasts yields similar results. Further, results fail to indicate significant differences in paid-for and matched sell-side research. Overall, our evidence suggests that paid-for research provides relevant information for the buy-and-hold investor that is comparable to that of matched sell-side research, providing empirical support for the SEC Advisory Committee recommendation.

Original languageEnglish (US)
Pages (from-to)903-931
Number of pages29
JournalAccounting Review
Issue number3
StatePublished - May 2014
Externally publishedYes


  • Paid-for analysts
  • Recommendations
  • Sell-side analysts
  • Valuation estimates

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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