Does Competition between Stars Increase Output? Evidence from Financial Analyst Forecasts

43 Pages Posted: 22 Apr 2014 Last revised: 4 Nov 2019

See all articles by Gil Aharoni

Gil Aharoni

University of Melbourne; Financial Research Network (FIRN)

Joshua Shemesh

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Fernando Zapatero

Questrom School of Business, Boston University

Date Written: November 1, 2019

Abstract

Top sportsmen often refer to competition against other top sportsmen as a motivation to exert more effort. We examine whether a similar pattern exists among another group of top professionals – star analysts. Our evidence suggests that star analysts concentrate their efforts and generate substantially more accurate earnings forecasts in multi-star stocks, in which they cross paths with other stars. We further show that the higher accuracy in multi-star stocks is not driven by other changes in the information environment of the firms. Our results suggest that competition among stars has substantial effects on the largest firms in financial markets.

Keywords: star analysts, tournament incentives, forecast error, earnings predictability, firms’ information environment

JEL Classification: G20; G23; G24

Suggested Citation

Aharoni, Gil and Shemesh, Joshua and Zapatero, Fernando, Does Competition between Stars Increase Output? Evidence from Financial Analyst Forecasts (November 1, 2019). Available at SSRN: https://ssrn.com/abstract=2427567 or http://dx.doi.org/10.2139/ssrn.2427567

Gil Aharoni

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Joshua Shemesh (Contact Author)

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Fernando Zapatero

Questrom School of Business, Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
617-353-3631 (Phone)

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