An Analyst by Any Other Surname: Surname Favorability and Market Reaction to Analyst Forecasts

Abstract

We find that forecast revisions by analysts with more favorable surnames elicit stronger market reactions. The effect is stronger among firms with lower institutional ownership and for analysts with non-American first names. Following the 9/11 terrorist attacks, and France and Germany’s opposition to the Iraq War, revisions by analysts with Middle Eastern and French or German surnames, respectively, generated weaker market reaction. Surname favorability is not associated with forecast quality, but it has complementary effects with forecast performance on analysts’ career outcomes. Surname favorability mitigates under-reaction to forecast revisions. These findings are distinct from the effects of ethnic, cultural proximity, or in-group bias.

Keywords: Equity analyst, surname favorability, earnings forecast, market reaction, motivated reasoning

JEL Classification: G14, G24, J15, J71