When Security Analysts Talk, Who Really Listens? : Large And Small Investors Find Different Results
When it comes to investing, it seems like a good idea to follow experts' recommendations. Real-world results generally support that intuition. However not all recommendations are equally profitable, and when deciding how to act, individual investors should take a second look at both the analyst reports and the circumstances under which the analysts operate. Due to the differences in trading patterns, small traders tend to lose money and large traders tend to make money. An analyst may have the incentive to issue a biased, overly optimistic report if he or she works at an investment banking house or a company.