The Information Content of Analysts' Notes and Analysts' Propensity to Compliment Other Disclosures

This paper studies analysts' notes, which are written disclosures distributed to large institutional investors as part of the brokerage firms' daily sales process. Analysts' notes are issued three times more frequently than recommendations and forecast revisions, and represent the bulk of analyst disclosures. The tests in this paper represent the first systematic study of notes. I find that the capital markets react to notes consistent with the idea that notes provide an economically significant amount of new information to investors. I also show that notes are less (but continue to be) informative after implementation of Regulation FD. My analysis of the timing of different types of analysts' disclosures - recommendations, forecasts and notes - shows that they tend to occur at the same time. These two results suggest that notes are a valid proxy for analyst disclosures. Last, a content analysis of randomly-selected notes enables me to identify analysts' sources of information and create a direct measure of analysts' information acquisition and interpretation activities. I find that analysts primarily quot;add valuequot; from an investors perspective by interpreting information