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

66 Pages Posted: 18 Nov 2019 Last revised: 4 Jan 2022

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

Using satellite imagery of retail firms’ parking lots to measure time-varying local firm-specific performance, we document that analysts incorporate local information into their forecasts. Analysts rely more on local signals when less firm-wide information is available. This incorporation of noisy local firm information has firm-level implications. Examining across industries, we find causal evidence that geographic concentration of analysts increases consensus forecast errors and decreases firm liquidity. These effects are stronger for harder-to-value stocks. The market values geographic firm information, as the abnormal return around forecast revisions is higher for analysts who cover a firm from a unique location.

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

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

Paper statistics

Downloads
534
Abstract Views
3,115
rank
72,145
PlumX Metrics