Charlie, Investment houses do track their analysts. Every now and then, an analyst will make a really bad call that causes the house to get egg on its face and the analyst loses his/her job. I also recall a bank analyst from a number of years ago for--I think it was Prudential--who remained bearish on banks so long he lost his job. Bearishness doesn't sell.
If you liked my Information Pricing Theory, try this one: We've all seen stocks move on analyst's recommendations, immediately pricing in that opinion. It always happens too fast for anyone not already in the stock to benefit. That suggests that every analyst's opinion, buy, sell, whatever (I always wondered what accumulate meant as opposed to buy; how do you accumulate without buying?), is already factored into the price of the stock at any given moment. (This is not an efficient market argument but it is a rational expectations argument.) If all the opinions, public facts good and bad, uncertainties, etc., are already in the stock, it means that every time you buy a stock you are saying the analysts are wrong. After all, their opinion is already in the price and you think the stock will go higher, so they must be wrong.
Just a thought.
Best
-Steve |
