Do sell-side analysts say “buy” while whispering “sell”?

Abstract We study here say-buy/whisper-sell behavior wherein analysts issue optimistic recommendations to attract retail investors while providing more accurate information to fund managers in private, sometimes resulting in fund managers selling the recommended stocks. We test whether fund managers return the favor using their votes for analysts in a Chinese “star analyst” competition. Managers are more likely to vote for analysts who exhibit greater “say-buy/whisper-sell” behavior toward these managers. This suggests that analysts reduce the accuracy of their public recommendations, thereby maintaining the value of their private advice to funds. Our findings help explain several empirical puzzles about analyst public recommendations.