Speed and Expertise in Stock Picking: Older, Slower, and Wiser?

61 Pages Posted: 2 Nov 2014 Last revised: 22 Mar 2018

See all articles by Romain Boulland

Romain Boulland

ESSEC Business School

Chayawat Ornthanalai

University of Toronto - Rotman School of Management

Kent L. Womack

University of Toronto - Rotman School of Management (Deceased)

Date Written: July 1, 2017

Abstract

There are significant differences among sell-side analysts in how frequently they revise recommendations. We introduce a method for classifying analysts based on their recommendation speed-style and show that much of this variation is an analyst-individual trait. Analysts who change their recommendations more slowly make recommendations that are more influential and generate better portfolio returns than those who do not. Examining the sources of differing investment value, we find that recommendations of slower-revising analysts are more likely to “lead the pack,” and revised following corporate disclosures that are harder to assess by non-stock experts. There is a strong tendency for analysts to change recommendations less frequently as their career progresses; however, recommendation speed-style is the only robust predictor of their recommendation value.

Keywords: Sell-side analyst; Speed; Reputation concern; Investment style; Stock recommendations

JEL Classification: G14; G24; J22

Suggested Citation

Boulland, Romain and Ornthanalai, Chayawat and Womack, Kent L., Speed and Expertise in Stock Picking: Older, Slower, and Wiser? (July 1, 2017). Rotman School of Management Working Paper No. 2517329. Available at SSRN: https://ssrn.com/abstract=2517329 or http://dx.doi.org/10.2139/ssrn.2517329

Romain Boulland (Contact Author)

ESSEC Business School ( email )

3 Avenue Bernard Hirsch
CS 50105 CERGY
CERGY, CERGY PONTOISE CEDEX 95021
France

Chayawat Ornthanalai

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Kent L. Womack

University of Toronto - Rotman School of Management (Deceased)

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