Asymmetric effects of sell-side analyst optimism and broker market share by clientele

This paper provides evidence for the first time on how different broker clienteles react to earnings forecast and stock recommendations. Greater trade volume is found to be associated with optimistic earnings forecasts while stock recommendations are stronger for analysts affiliated with retail brokerage firms than those affiliated with institutional brokerage firms. We also find that the market share of buy volume (that is, volume from buy orders) substantially rises on recommendation upgrades while the market share of sell volume rises on recommendation downgrades, and that this effect is stronger for retail clientele.