Global Expertise of Financial Analysts

60 Pages Posted: 30 Aug 2016 Last revised: 3 Nov 2016

See all articles by Guang Ma

Guang Ma

National University of Singapore

Stanimir Markov

University of Texas at Dallas - Naveen Jindal School of Management

Joanna S. Wu

University of Rochester - Simon Business School

Date Written: October 31, 2016

Abstract

We describe the challenges of forecasting earnings in a globally interconnected marketplace, and we document inefficient use of information regarding foreign country exposures and expected country GDP growth at the consensus and individual forecast levels. A country’s proximity to the US, importance to the firm, and visibility, as well as availability of more precise information about foreign country exposures, contribute to consensus forecast efficiency. We identify a dimension of individual analyst global expertise — similarity in exposure between the firm and the rest of the firms in the analyst portfolio — and show that it contributes to forecast efficiency, accuracy, and informativeness and that it helps the analyst achieve the coveted all-star rank, suggesting that globalization not only poses a challenge but also creates an opportunity for research providers and analysts to distinguish themselves.

Keywords: financial analysts, earnings forecasts, global expertise

JEL Classification: G10, G17, M41

Suggested Citation

Ma, Guang and Markov, Stanimir and Wu, Joanna, Global Expertise of Financial Analysts (October 31, 2016). Simon Business School Working Paper No. FR 16-06. Available at SSRN: https://ssrn.com/abstract=2830333 or http://dx.doi.org/10.2139/ssrn.2830333

Guang Ma (Contact Author)

National University of Singapore ( email )

15 Kent Ridge Drive
Mochtar Riady Building
Singapore, 119245
Singapore
+65-66012838 (Phone)

Stanimir Markov

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

P.O. Box 830688
Richardson, TX 75083-0688
United States
972 883 5166 (Phone)

Joanna Wu

University of Rochester - Simon Business School ( email )

Carol Simon Hall 3-160D
Rochester, NY 14627
United States
585-275-5468 (Phone)
585-442-6323 (Fax)

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