Judgment Effects of Familiarity with an Analyst's Name
42 Pages Posted: 5 Feb 2013 Last revised: 10 Apr 2013
Date Written: February 4, 2013
We conduct an experiment with MBA students where we manipulate whether participants are exposed to an analyst’s name in Stage 1, and whether they are given a cue in Stage 2 about the particular analyst’s prior performance as an All-star analyst. We find that in the absence of a favorable performance cue about the analyst, mere exposure to the analyst’s name enhances perceived analyst credibility, which in turn influences the investors’ earnings estimates. This suggests a benefit to analysts in terms of building credibility merely through media exposure that cannot be explained by performance. In fact, a diagnostic cue such as the analyst’s high prior performance no longer matters to investors once they have prior exposure to the analyst’s name. We also show a cost of media exposure in that the analyst’s credibility takes a bigger hit for inaccurate forecasts.
Keywords: exposure effect, familiarity, All-Star analyst, analyst forecast error
JEL Classification: C91, M41
Suggested Citation: Suggested Citation