Equity Analyst Social Interactions and Geographic Information Transmission

Forthcoming, Review of Accounting Studies

45 Pages Posted: 22 Aug 2017 Last revised: 4 Aug 2022

See all articles by Qi Chen

Qi Chen

Duke University - Fuqua School of Business

William J. Mayew

Duke University - Fuqua School of Business

Huihao Yan

City University of New York - Baruch College - Zicklin School of Business

Date Written: March 9, 2021

Abstract

We find that earnings forecasts by analysts with more local peers, defined as analysts working in the same brokerage office who cover different firms headquartered in the same area, are more accurate. These heightened accuracy effects are concentrated in settings where local peers are particularly valuable, such as when analysts have less access to corporate management, when earnings are harder to forecast, and when analysts have stronger incentives to work hard. In examining the nature of the information transmitted by local peers, we find that earnings forecasts by analysts with more local peers better reflect negative geographic shocks in firm earnings. In addition, geographic momentum in stock returns is attenuated for firms that are followed by more local peers, especially when area returns are negative. These findings suggest that social interactions among local peer analysts facilitate the transmission of complex, soft information about geographic factors to investors.

Keywords: Social Interaction, Financial Analysts, Geographic Information

JEL Classification: G10, G11, G12, G14, G23, G24

Suggested Citation

Chen, Qi and Mayew, William J. and Yan, Huihao, Equity Analyst Social Interactions and Geographic Information Transmission (March 9, 2021). Forthcoming, Review of Accounting Studies, Available at SSRN: https://ssrn.com/abstract=3022183 or http://dx.doi.org/10.2139/ssrn.3022183

Qi Chen

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
(919) 660-7753 (Phone)

William J. Mayew (Contact Author)

Duke University - Fuqua School of Business ( email )

Box 90120
Durham, NC 27708-0120
United States
919-660-7781 (Phone)
919-660-7971 (Fax)

HOME PAGE: http://www.fuqua.duke.edu/faculty/alpha/mayew.htm

Huihao Yan

City University of New York - Baruch College - Zicklin School of Business

One Bernard Baruch Way
New York, NY 10010
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
385
Abstract Views
2,777
rank
108,827
PlumX Metrics