Do All Analysts Have the Same Incentives?
There are two general types of financial analysts:
• Buy side analyst. An analyst employed by an entity, such as a mutual fund, which invests on its own accounts. Unlike that of the sell side analysts employed by brokerage firms, research produced by buy side analysts is usually unavailable outside the firm that hired the analyst.
• Sell side analyst. An analyst employed by a brokerage firm or another firm that manages client accounts. Unlike that of the buy side analysts employed by mutual funds, research produced by sell side analysts is usually available to the public. Some financial analysts have been criticized for making optimistic forecasts of the earnings of potential clients in order to curry favor with those potential clients. Do you think that this criticism is directed at buy side analysts or sell side analysts? Explain.