The Impact Of Interest Of Conflicts On Analysts' Security Recommendations' Accuracy

In the security market,analysts take the advantage of information and use their ability of analyzing and forecasting to make advices to investors.As important players of securities market in China,security analysts' advices have great impact on security market and investors.The study of security analysts has important theoretical and practical significance in guaranteeing theirs' independency,impartiality and efficiency,preventing the manipulation of stock prices and helping the security analysts to take function in maintaining the efficiency of the markets.First I did an empirical research of the Chinese security analysts' predicting accuracy.The sample data is a 45 months(2005-2008.9)stock recommendation data of ten investing banks from the CSMAR data base to check the accuracy of analysts. The results show that compared with the standards,analysts' recommendations are not as accuracy as they seem.Then I analyzed the reasons behind this phenomenon.According to the reality of the security markets,I construct a game model,including the sell side analysts, institution investors and small investors.First of all I proposed the characters of investors,then analyzed their different reactions to security analysts' recommendations,and got the best choice for the analysts who confront with the interest conflicts.According to the result of the game model,I constructed a empirical model to check which factors had influence on the accuracy of the analysts recommendations, and the empirical results support what we got from the game model.The possibility of the analysts made correct decisions have positive relationship with the talents of the analysts,and so as to the size of the security company.The research department has conflicts with the investment bank department,which had influence of the independence of the analysts.The quotation of stock market has great influence on the accuracy of analysts' recommendations.The last part of this article I made some suggestions.It includes:construct short selling institutes of the security market,perfect the incentive and restraint mechanism for analysts,raise the capability of analysts,and improve the moral of analysts.