Here's a shocker: institutions front-run analysts' calls
I came across a reference to an interesting study conducted by Jennifer Juergens of the University of Texas at Austin and Laura Lindsey of Arizona State University this weekend. The duo's study took a close look at the movement of individual stocks in the days leading up to a ratings change by an analyst. Not surprisingly, the study found that stocks often moved up prior to an analysts' upgrade and vice versa in the days before an official call was made.
This leads one to believe that investment banks' favorite customers are getting a sneak peek at companies' ratings changes prior to the general public. Noooooo, they wouldn’t' do that would they? Cough Goldman, Cough...Goldman's Trading Tips Reward Its Biggest Clients.
This is why it's important to do your own research and never rely upon the opinion of mainstream Wall Street "analysts" from big investment banks to make decisions about whether to invest in a company. I personally prefer investment research from independent shops or doing the legwork on my own.
Getting Out Early: An Analysis of Market Making Activity at the Recommending Analyst's Firm