- Alterations of levels of recommendations (i.e. changing a strong buy to a buy)
- Additions and deletions of records
- Anonymizing (i.e. removing the analyst names from recommendations)
Now it's back, with even more interesting results. The revisions they document have systematic patterns to them:
- Additions were far more likely to be of the "hold" or "sell" variety
- Deleted records were far more likely to be of "buy" or "strong buy" recommendations.
- Alterations were primarily seen on "buy" and "strong buy" recommendations, which were subsequently revised downward."
- Anonymization" of recommendations is more likely for bolder recommendations, for more senior analysts, and for those who had Institutional Investor "all star" status.
- Changes were more likely to be seen in the records of larger investment houses, whether measured by analyst staff or the size of their investment banking operations.
- Finally, changes pretty much never were seen for brokerage firms that subsequently ceased operations - only for those that survived.
The paper also does some nice testing to see whether the changes affect the usefulness of analyst forecasts and recommendations for making trading strategies.
A good read, and recommended for anyone who uses I/B/E/S for research or trading purposes.
HT: Barry Ritholtz at The Big Picture (who, as usual, has a better title for his post than I do).