Do analysts generate trade for their firms? Evidence from the Toronto stock exchange

It has generally been assumed that the potential commission revenue is an important determinant of a sell-side analyst's decision of what firms to cover and what information to publicly release. However, because stock volume has not been disaggregated on a brokerage-firm level, uncertainty remains regarding the economic importance of the relation between analyst coverage and brokerage-firm volume. Using a unique data set that identifies the broker(s) involved in each trade, I find that brokerage volume is significantly higher in covered stocks than in uncovered stocks. On average, brokers increase their market share in covered stocks by 3.8% relative to uncovered stocks. (C) 2001 Elsevier Science B.V. All rights reserved.