Political Contributions and Analyst Behavior
Florida State University - The College of Business
University of Miami - School of Business Administration
May 5, 2014
McCombs Research Paper Series No. FIN-01-12
We show that political preferences of analysts, as revealed by their personal political contributions, are correlated with their forecasting styles and influence the information dissemination process. Analysts who contribute primarily to the Republican Party exhibit a more conservative forecasting style. Their earnings forecast revisions are less likely to be bold, while their stock recommendations contain more modest upgrades and downgrades. Further, their forecasts are more accurate since conservative behavior partially mitigates the adverse effects of known analyst biases. The market reaction following revisions by Republican donor analysts is weaker even though their forecasts are more accurate. Taken together, these findings suggest that personal traits of analysts influence their forecasting behavior and stock prices.
Number of Pages in PDF File: 61
Keywords: Political contribution, Republican, Conservative, Analyst, Forecasting Styleworking papers series
Date posted: October 3, 2010 ; Last revised: June 25, 2014
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