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  • November 2008
  • Journal Article
  • Journal of Financial Transformation

Can Research Committees Add Value for Investors? An Analysis of Lehman Brothers' Ten Uncommon Values® Recommendations

By: Boris Groysberg, Paul M. Healy and Yang Gui
  • Format:Print
  • | Pages:8
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Abstract

Since 1949 Lehman Brothers has used an investment committee to select the top ten recommendations made by its analysts each year. We examine the performance of this committee's recommendations and find that on average its selections generated abnormal returns of 2.7% at the recommendation announcement and 4.5% for the remainder of the year. This performance cannot be explained by changes in analyst recommendations and/or target prices that accompany the committee report. Nor was it due to analyst screening ability since the returns were higher than those that earned from investing in analysts' top stock picks that were not selected by the committee. Finally, we find that abnormal announcement returns and trading volume at the report publication are correlated with market-adjusted returns for the prior year's stock selections, suggesting that investors believe that a successful process in one year is likely to be repeated the following year. We believe that these findings are particularly interesting given recent efforts to require firms to use research recommendation committees to improve the quality of research.

Keywords

Forecasting and Prediction; Stocks; Financial Markets; Investment; Investment Return; Governing Rules, Regulations, and Reforms; Performance Expectations; Groups and Teams; Research; Value Creation

Citation

Groysberg, Boris, Paul M. Healy, and Yang Gui. "Can Research Committees Add Value for Investors? An Analysis of Lehman Brothers' Ten Uncommon Values® Recommendations." Journal of Financial Transformation 24 (November 2008): 123–130.
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About The Authors

Boris Groysberg

Organizational Behavior
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Paul M. Healy

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    • August 2023
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    Beamery: Using Skills and AI to Modernize HR

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    The LPGA’s Long Drive Toward Gender Equity (B)

    By: Boris Groysberg and Alexis Lefort
More from the Authors
  • Beamery: Using Skills and AI to Modernize HR By: Boris Groysberg, Alexis Lefort, Susan Pinckney and Carolina Bartunek
  • Revenue Recognition at Stride Funding: Making Sense of Revenues for a Fintech Startup By: Paul M. Healy and Jung Koo Kang
  • The LPGA’s Long Drive Toward Gender Equity (B) By: Boris Groysberg and Alexis Lefort
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