TY  - JOUR
AU  - Cohen,Lauren
AU  - Frazzini,Andrea
AU  - Malloy,Christopher
TI  - Sell Side School Ties
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13973
PY  - 2008
Y2  - May 2008
UR  - http://www.nber.org/papers/w13973
L1  - http://www.nber.org/papers/w13973.pdf
N1  - Author contact info:
Lauren Cohen
Harvard Business School
Baker Library 273
Soldiers Field
Boston, MA 02163
Tel: 617/495-3888
E-Mail: lcohen@hbs.edu

Andrea Frazzini
AQR Capital Management, LLC
Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
Tel: 203 742 3894
E-Mail: andrea.frazzini@aqr.com

Christopher Malloy
Harvard Business School
Baker Library 277
Soldiers Field
Boston, MA 02163
Tel: 617/495-4383
E-Mail: cmalloy@hbs.edu
AB  - We study the impact of social networks on agents’ ability to gather superior information about firms.  Exploiting novel data on the educational backgrounds of sell side equity analysts and senior officers of firms, we test the hypothesis that analysts’ school ties to senior officers impart comparative information advantages in the production of analyst research.  We find evidence that analysts outperform on their stock recommendations when they have an educational link to the company. A simple portfolio strategy of going long the buy recommendations with school ties and going short buy recommendations without ties earns returns of 5.40% per year.  We test whether Regulation FD, targeted at impeding selective disclosure, constrained the use of direct access to senior management. We find a large effect: pre-Reg FD the return premium from school ties was 8.16% per year, while post-Reg FD the return premium is nearly zero and insignificant.  In contrast, in an environment that did not change selective disclosure regulation (the UK), the analyst school-tie premium has remained large and significant over the entire sample period.
ER  -