Analyst Contrarianism

Journal of Financial Reporting, Fall 2019, Vol. 4, No. 2, pp. 61-88.

58 Pages Posted: 19 Aug 2019 Last revised: 11 Jan 2020

See all articles by Zahn Bozanic

Zahn Bozanic

Florida State University

Jing Chen

Stevens Institute of Technology - School of Business

Michael J. Jung

University of Delaware - Accounting & MIS

Date Written: August 15, 2019

Abstract

We examine a specific form of what we term analyst contrarianism. We define contrarianism as cases where an analyst expresses a summary opinion contrary to the direction of a given earnings surprise or revision. Distinct from analyst optimism or boldness, we document that analysts interpret negative (positive) earnings news in a positive (negative) light in approximately 11-15 percent of reports. We conjecture that some analysts look for opportunities to make a contrarian stock call for their clients in order to gain visibility, recognition, and career advancement. Our empirical evidence, which is supported by analyst interviews and content analysis of analyst reports, shows that: i) analysts at non-top-tier brokerage houses are more likely to make a contrarian call, ii) analyst reports that contain contrarian opinions are associated with greater market reactions, and iii) contrarian analysts are more likely to exhibit career advancement.

Keywords: analysts; earnings; contrarianism; textual analysis

JEL Classification: G24; M41

Suggested Citation

Bozanic, Zahn and Chen, Jing and Jung, Michael J., Analyst Contrarianism (August 15, 2019). Journal of Financial Reporting, Fall 2019, Vol. 4, No. 2, pp. 61-88.. Available at SSRN: https://ssrn.com/abstract=3436571

Zahn Bozanic

Florida State University ( email )

Tallahasse, FL 32306
United States

Jing Chen

Stevens Institute of Technology - School of Business ( email )

Hoboken, NJ 07030
United States

Michael J. Jung (Contact Author)

University of Delaware - Accounting & MIS ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

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