Unequal access to analyst research created by Andrew Lepone, Henry Leung, and J George Li

This study examines the relationship between equity analysts and information asymmetry, and the extent of leakages in analyst recommendations. Literature suggests that analysts reduce information asymmetry by bringing privately held information to the market, and through superior analysis of publicly available information. However, we find that investor access to analyst reports is far from even, and show evidence consistent with the leakage of analyst recommendations. We find that leakages provide annualised cumulative abnormal returns of approximately 6.30% for upgrades and 12.53% for downgrades over a four-week period, after a generous provision of 1% (round trip) for transaction costs. In our examination of broker/analyst size, we find evidence of greater leakage from the smaller brokers on stock downgrades, but not upgrades. We suggest that smaller brokers are less likely to have an established relationship with company management, are less reliant on them as a source of future information, and are therefore less hesitant to leak downgrades.