The quiet period has something to say

Recent studies suggest that analyst ratings have become less biased following the Global Settlement and National Association of Securities Dealers (NASD) and New York Stock Exchange (NYSE) Rules implemented in 2002. Assuming analyst ratings are more reliable due to the decline in positive bias, we investigate the existence of excess returns for various holding periods based on the strength of ratings issued around the expiration of the Initial Public Offering (IPO) quiet period. We also control for the impact of analyst affiliation and sanctions against investment banks on returns up to 1 year after quiet period expiration. Overall, we find that the strength of analyst coverage can indeed predict future returns, and several factors impact these returns. In addition, we find that only firms which receive positive coverage from a bank sanctioned in the Global Settlement earn positive risk-adjusted returns.