FI.Chapter3 - I i = ft/lillt" 5or.4,le,emy...

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Unformatted text preview: . I i. = ft/lillt .-;-*-,:;" 5or.4,le,emy Kohi "tonl Olortroie! HecryHoid," Fodune, De.embe, 30, 2002, 73; Je,emy Kohn a^d Ne50^ D Sc,wor:, 'ANewlnveno,E,o?lo'Fodune,Novem6er25,2002,35-3SiDovdRynec/ii,'ThePriceolBefgRgnt. F.dne.fe6 ory4,2AAl, 126 lr'l,Ne3onD S.hwoiz ondlercmy Kohi,'C.n This B!lRutr A9o n," Forune, De.embe,30,2002,63 32, oid Alyndo wheol, "Holl ol Shome Meiil iyichroEigirh D.roio,y,' fodune, Ap,i 29 2002 23 Fica*ar*!a! 5€ateaeteffits. *as9€ FEew. affid Y*xes hcn evaluaiing a coupany, wlto crn you tr st? The analysts ai top brokeragc firms rate compa nics, using lerlns such as buy, hold, or sell. \4,r\ b( \,'u thrrl.. )^u c.,n rru-t lrr( rrJiin!:.. crrcF rl,(\L ,rr'.rl)\l- dre l r-hl\ rr.ri,,.d .,,J hdre ,r',,*. l,' gr..|l ddld "ources. Th|lr\ rg.rin. \4h(rr ih( m.t| |t r \',rs in 'he r,rddl, ''r.,','rg .iv.,Jy de.lirc ir rl-. ,drlv 2LruU-. these analysts nade 7,033 buy recomnen- tl. . ior,.. bLr .,nly </ -rll-. Wl dt , oL,ld p ,-'i- bl\ ..,,r." -,,ch.,primi-,rl Hoh "boul rh, ir own Personal compensation and their o$'r Iirrrr.'pn,fir-. r.,rlrer tlr.,n ll,.ir . icr', b",1 interests? Mosi brokerage firms are mc]n- bers of a corporntc family that includes an '\,.,rnrLni b.,,,1. li rr un,rly. I \F. d ,or" pany a ncgative ratilg, the company will lrlf rl. Ir!u.rrnpr,l b.i'rlirg bu-irc'. lo ,r banking firm thai gives it a better raiing. To pr.!"nr rhi:.i, l'.li,'r .rndlv-t. dre prf-.-,r e.l r.' '{f.,rir f'.'n, n,.,t'ng lo\v. otte|l.i\,-. rirg,. l,rdLfJ .,r.rl\ ,1. s l,o d"r'l /nll In lrI..rre ,'ftr r lrred. -u, h r. M lt V.'r".for- nFrl) ,,t Cr,'lil <'Li.-F frr-' Bo-t,',,. {h,, gave honest (nnd subscqueltly shown to bc nccuratr) ncgative ratlnts. In fact, at CSI'U, the analysis actuallv reported b invcshrlcnt bankers, and intemal c-mlils fcvcnlcd thaL .n.rlysts were often replaced k) korp invest nront bankhg clients happy. At Mcrrill L),nch, e mail revealc'd in ol,en In'.re di.lurbing .irur ion An,ly.l\ r,.n.i.- tc'ntly gate posiii\.e raiings to firms, but then bLasted the firms in intfrnal c-Inails. Fof cramplc, analysts gave one conp:rny a ,1r., r$ bI\ r,rlind bul \^ ru.ts ll,dl lh c,'rn pnn)' was "a piece of junk" in their intcrnal c-mrils. That's actrially bcttcr than ilre c-rnail for another posiiivcly rak d conpant u,hich was callcd a "piece of s t." Anothc'r conpany {ras raicd "Neutral jn Lhc short term/Mhimum 40% appreciniion long tcrm," but e mails staied thai thcrc'wns noth- iu8 interesting aboui the coDPan)', "c'xcept b,lnking fccs." Ne('York atiornev Seneral Eliot Spit,acr broutht action againsi a nlLmber of Wall Strcct firms, (-hich eventrially scttled tor llj1.4billion (but'hichdidn'istop thomany suiLs brought against ihe firms by individ ual invesbrs who lost money allcr iciing on ih€ analysts' recommendations). Thcsc lcgal actions are getiing some results. For exanrplc, CSFB has reassigned anal)rsts so that lhe)' rcport b its gcneral co nsel instead of its secu- rities division, and Morgan Stanle!,'s analysts have actually...
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This note was uploaded on 06/08/2009 for the course FI 601-602 FI601-602 taught by Professor Prof.geary during the Spring '09 term at New Haven.

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FI.Chapter3 - I i = ft/lillt" 5or.4,le,emy...

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