The Performance of Analysts with a CFA Designation: The Role of Human-Capital and Signaling Theories

Posted: 3 Jun 2011

See all articles by Gus De Franco

Gus De Franco

Tulane University - A.B. Freeman School of Business

Yibin Zhou

University of Texas at Dallas - School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2009

Abstract

This study compares the performance of sell-side equity analysts with and without a Chartered Financial Analyst (CFA) designation. Using a large sample of forecasts, our tests indicate that CFA charterholders issue forecasts that are timelier than those of non-charterholders. The results for accuracy are mixed. We establish that while charterholders perform at statistically significant higher levels than non-charterholders in some tests, we find evidence that charterholders improve along the dimension of timeliness after they receive their CFA charter. This result provides support for a human-capital explanation in which charterholders improve their productivity during the CFA program. Finally, we show that the market reaction for smaller firms is stronger for charterholders than non-charterholders after controlling for timeliness, boldness, accuracy, and optimism. This result provides evidence consistent with "credentialism", a variant of signaling theory in which a professional's education level provides a signal about the professional's quality to his or her clients.

Keywords: analyst forecasts, analyst performance, human capital, signaling, credentialism

JEL Classification: A11, G14, G28, G29, J24, J32, M41

Suggested Citation

De Franco, Gus and Zhou, Yibin, The Performance of Analysts with a CFA Designation: The Role of Human-Capital and Signaling Theories (March 1, 2009). Accounting Review, Vol. 84, No. 2, 2009, Available at SSRN: https://ssrn.com/abstract=1856715

Gus De Franco

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Yibin Zhou (Contact Author)

University of Texas at Dallas - School of Management ( email )

2601 N. Floyd Road
Richardson, TX 75080
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
608
PlumX Metrics