The Effect of Star Analyst Tournaments on Firms' Information Environment
66 Pages Posted: 22 Apr 2014 Last revised: 2 Sep 2016
Date Written: August 26, 2016
Star analysts typically cover 10 to 15 stocks. In half of the stocks they cover, they cross paths with other stars (battleground stocks). We show that being the most accurate star in battleground stocks plays a key role in the annual rankings from Institutional Investor magazine. Star analysts respond to this tournament by producing more accurate earnings forecasts in battleground stocks than in other stocks they cover. We explore several alternative explanations and find that they cannot account for the higher accuracy in battleground stocks. Head-to-head competition between star analysts plays a key role in a firm’s information environment.
Keywords: Star Analysts, Strategic Announcements, Forecast Error
JEL Classification: G20, G24
Suggested Citation: Suggested Citation