Analyst Behaviour: The Geography of Social Interaction

Abstract:     
An analyst who works in Germany is more likely to publish a high (low) price target regarding a DAX30 stock if other Germany based analysts are also optimistic (pessimistic) about the same stock. This finding is not biased by the fact that DAX30 companies are headquartered in Germany. In times of bull markets, price targets of analysts who regularly exchange their opinion are higher correlated compared to other analysts. This effect vanishes in a bearish market environment. This suggests that communication among analysts indeed plays an important role. However, analysts’ incentives induce them not to deviate too much from the overall average during an economic downturn.

Number of Pages in PDF File: 29

Keywords: Analyst Behaviour, Social Interaction, Herding, Word-of-Mouth

JEL Classification: A14, D83, G12, G24

working papers series