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RFS Advance Access published online on July 6, 2006
Review of Financial Studies, doi:10.1093/rfs/hhl027
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© The Author 2006. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Article

Tipping

Paul Irvine 1 *, Marc Lipson 2, and Andy Puckett 3
1 Terry College of Business University of Georgia Athens, GA 30602
2 Darden Graduate School of Business Administration University of Virginia Charlottesville, VA 22906
3 University of Missouri Columbia, MO 65211

* To whom correspondence should be addressed.
Paul Irvine, E-mail: pirvine{at}terry.uga.edu


  Abstract

We investigate the trading of institutions immediately prior to the release of analysts’ initial buy recommendations. We document abnormally high institutional trading volume and buying beginning five days before recommendations are publicly released. Abnormal buying is related to initiation characteristics that would require knowledge of the content of the report - such as the identity of the analyst and brokerage firm, and whether the recommendation is a strong buy. We confirm that institutions buying prior to the recommendation release earn abnormal profits. Our results are consistent with institutional traders receiving tips regarding the contents of forthcoming analysts’ reports.


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