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Buys vs Sells

Integrity Research

New York – today marks a departure from the traditional style of analysis used in our quarterly assessment of research performance. The data used in this analysis is from Investars and the interpretation of the data is Integrity’s.

Today, the question we are asking the data is whether the distribution of sell recommendation portfolios is different from the distribution of the buy recommendation portfolios of the research providers.

We created a histogram (below) which shows the number of research providers (y-axis) that generated each level of return (x-axis) over a one year period.  Theoretically, it is more difficult to select sells than it is to select buys. We note that  part of the difficulty in selecting sells in the real world relates to the costs of funding these short positions, which means that the timing of shorts is more critical than those of long positions. However, the Investars analysis does not treat sells like short positions, but tracks the portfolio of sells without regard for funding costs.

In the graph above, the buy portfolio of the research providers is much more centrally located (less variance) and has fewer outliers, while the sell portfolio is broadly disbursed, has a large number of outliers and has one fat tail close to the zero return mark. As a result, we must conclude that the buy and sell portfolio distributions are distinct from one another over the time period we have reviewed.

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS - USA

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