February 26, 2019
Dear Sir or Madam,
In response to your call for engagement and data relating to research provisions, I attach my recent paper entitled "An early assessment of the informational environment post MiFIDII." This deals with research availability. In the paper I compare analyst coverage in the US and UK broad markets.
In the attached paper I chart the change in stock coverage in the UK and US. Many expect MiFIDII to reduce stock coverage. Interestingly, I find that UK stock coverage has contracted only slightly, and at a slower rate than in the US. Analysis of IBES (which I have confirmed via Bloomberg) indicates that the informational environment looks fairly healthy, if a little slimmer for some of the most highly-covered stocks. There are of course limitations, which I note in the paper. One limitation is the quality of analysis. If an analyst is required to cover more stocks we might expect quality of analysis to decline. A separate paper with my colleague Prof. Bill Rees, also at the University of Edinburgh, shows that there is reason to be optimistic regarding the potential for machine-learning in producing investment research; you can find this paper here:
Rees, William and Haig, Alistair, Analyst versus Machine-Learning Risk Assessments (June 25, 2018). Available at SSRN: https://ssrn.com/abstract=3202247 or http://dx.doi.org/10.2139/ssrn.3202247
Both papers are funded by the University of Edinburgh and have been prepared for practitioners and academics. The authors have no commercial relationship with investment management or research firms.
Please do not hesitate to contact me if I can be of further assistance in issues relating to investment management and research.
Alistair Haig, CFA
ECF in Finance
University of Edinburgh Business School
29 Buccleuch Place
Edinburgh, EH8 9JS
The University of Edinburgh is a charitable body, registered in Scotland, with registration number SC005336.