The integrity of financial analysts:Evidence from asymmetric responses to earnings surprises

This paper investigates the integrity of financial analysts by examining their recommendation responses to large quarterly earnings surprises. Although there is no significant difference in recommendation changes between affiliated and unaffiliated analysts in response to positive earnings surprises, affiliated analysts are more reluctant than unaffiliated analysts to downgrade stock recommendations in response to negative earnings surprises. The evidence implies that conflicts of interest undermine the integrity of financial analysts. We further examine the effects of reputation concern and the Global Research Analyst Settlement as informal and formal mechanisms, on restoring analysts’ integrity. The results show that the positive bias in recommendations remains prevalent for affiliated analysts from reputable investment banks and for the postreform period. Finally, evidence from market reactions suggests that investors fail to notice that analysts’ integrity is compromised by conflicts of interest and are misled by affiliated analysts

Estimation of Rural Demand for Natural Gas

The Government of Alberta has undertaken a study to determine the feasibility of supplying natural gas to rural areas of the Province not currently served. The study covers various aspects relevant to the development of an overall plan for rural gasification, but the emphasis is on major factors affecting the economic viability of the venture. We discuss in this paper one segment of the study--the problem of determining the demand for natural gas in rural areas. Three separate demand schedules, each based on a different methodology but using common data obtained from a survey of rural residents, are estimated. The three demand schedules are analysed and compared in an attempt to establish an overall demand curve for natural gas in rural Alberta. The price elasticity of demand for natural gas is determined from the demand function obtained.