The Value of Differing Points of View: Evidence from Financial Analysts' Geographic Diversity

44 Pages Posted: 18 Nov 2019 Last revised: 19 Aug 2020

See all articles by William Christopher Gerken

William Christopher Gerken

University of Kentucky - Finance

Marcus Painter

Saint Louis University - Department of Finance

Date Written: November 1, 2019

Abstract

We show that analysts incorporate geographically dispersed information about firms into individual forecasts and that limited analyst geographic diversity adversely affects consensus forecasts and firm liquidity. Using satellite imagery of U.S. retailers' parking lots, we find analysts shade their own forecast in the direction of local car counts relative to other analysts covering the same firm at the same time but from different locations. Examining all industries, we find firms with more geographically concentrated analyst coverage have higher consensus forecast errors and are less liquid. Evidence from shocks in geographic coverage due to brokerage closures suggest these relations are causal.

Keywords: Analysts, Fintech, Geography, Diversity, Forecasts, Liquidity

JEL Classification: G14, G24, O3, M41

Suggested Citation

Gerken, William Christopher and Painter, Marcus, The Value of Differing Points of View: Evidence from Financial Analysts' Geographic Diversity (November 1, 2019). Available at SSRN: https://ssrn.com/abstract=3479352 or http://dx.doi.org/10.2139/ssrn.3479352

William Christopher Gerken

University of Kentucky - Finance ( email )

College of Business & Economics
Lexington, KY 40506-0034
United States

HOME PAGE: http://www.willgerken.com

Marcus Painter (Contact Author)

Saint Louis University - Department of Finance ( email )

Saint Louis, MO
United States

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