Stock Analysts' Recommendations and Market Participation

This paper questions the role of analyst recommendation in investor decision. To do so, we propose a model in which the investor weights his own signal and the analyst recommendation to make his trading decision: buy, sell, or non-participation. The analyst is interested in the volume of transactions, which leads to a conflict of interest. We find that the investor probability to trade can, in some cases that we precise, be higher when the analyst does not truthfully reveal his information. Then no other investor could infer information from the volume of transactions