Chayawat Ornthanalai

There are significant differences among sell-side analysts in how frequently they revise recommendations. We show that much of this variation is an analyst-individual trait. Analysts who change recommendations more slowly make recommendations that are more influential and generate better portfolio returns. Slower-revising analysts tend to change recommendations following corporate news that are harder to interpret by nonstock experts, and our evidence suggests that their investment value derives from their ability to better interpret hard-to-assess information. On average, analysts change recommendations less frequently as their career progresses; however, recommendation speed-style is the dominant predictor of their recommendation value.

There is widespread agreement that corporate debts’ recovery rates are time varying, but empirical work in this area is limited. We show that the joint information from the term structure of senior and subordinate credit default swaps can identify the level and the dynamics of recovery rates. We estimate a reduced-form no-arbitrage model on 46 firms across different industries. We find that the term structure of expected recovery rates is, on average, downward sloping. However, an inversion occurs during the 2008 crisis, suggesting the market expects higher recoveries conditional on short-term survival. The inversion is more pronounced for firms in distressed industries.

Peter Christoffersen passed away on June 22, 2018 at an early age. He was one of the most prolific and gifted researchers in the area of derivatives, combining a very strong theoretical background with an appreciation for the practical details of real world markets. He will be sorely missed. This memorial article provides a few general comments about his work and offers reminiscences about Peter as a researcher, a teacher, and a mentor from three of his coauthors and former students.