Global Expertise of Financial Analysts
60 Pages Posted: 30 Aug 2016 Last revised: 3 Nov 2016
Date Written: October 31, 2016
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: Suggested Citation