Analysts earn their keep writing forecasts of markets, stocks and other asset classes. The same reports go out but the bigger investors always seem to be the ones that make the money. Why is this the case?

Some answers might come from a WP Carey study which works off the assumption that the industry is burdened with conflicts of interest and similar baggage. Securities analysts support the investment banking side of their business. For most big firms, research is just salesmanship, and stock ratings are tools to get investment-banking business. Which means there's enormous pressure to put out positive reports and not bag the stock. Yes, there are Chinese walls but they're paper thin. For the investor, the key is whether those conflicts are recognised.

The study tracked how investors responded to 50,000 reports issued by nearly 3000 analysts between 1993 and 1999.

The study found that large investors, the ones who could afford to buy and sell at least $30,000 worth of stock at any one time, tended to recognise the conflicts. As a result, they took "buy" recommendations with a grain of salt but were more likely to respond to downgrades, "hold" or "sell" recommendations. Smaller investors were more likely to respond to upgrades and "buy recommendations.

The study would suggest the need for disclosure about conflicts, real and potential. And it would also suggest that smaller investors need to be wary when assessing an analyst's report. Drawing reports from many sources would be a start.