Do Social Interactions Communicate or Garble Information? Evidence from Equity Analysts

41 Pages Posted: 22 Aug 2017 Last revised: 10 Mar 2021

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 examine whether social interactions among local peers, defined as analysts working in the same brokerage office who cover different firms headquartered in the same area, communicate or garble information. We find that analysts with local peers produce more accurate earnings forecasts and their forecast revisions generate stronger stock market responses. Their forecasts are less optimistically biased and less affected by common errors in consensus forecasts. We also find that geographic momentum in stock returns is weaker when firms are followed by analysts with local peers, and that analysts are more likely to initiate coverage of firms with more local peers. These findings indicate that social interactions among local peer analysts can transmit useful information.

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, Do Social Interactions Communicate or Garble Information? Evidence from Equity Analysts (March 9, 2021). 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

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