Do Star Analysts Shine in Opaque Industries? Evidence from European Banking

58 Pages Posted: 15 Jun 2020

See all articles by Benoit d'Udekem

Benoit d'Udekem

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management - Centre Emile Bernheim (CEB); Analysis Group, Inc.

Date Written: May 19, 2020

Abstract

We assess whether skills allow sell-side analysts to mitigate the opaqueness of a whole industry. We rely on a sample of 5,150 recommendation changes relating to 80 European banks during a period that encompasses the financial and euro-zone crises. In contrast with other industries, recommendation changes made by talented analysts are not likelier to influence bank stock prices, as if opaqueness impedes analyst influence. However, these changes induce sharp negative revaluations of bank stock prices. Our results suggest that stars remain influential by focusing on selected large, complex institutions and being apt at identifying mis-pricings and uncovering bad news.

Keywords: Analysts, Skills, Banks

JEL Classification: G14, G21, G24

Suggested Citation

d'Udekem, Benoit, Do Star Analysts Shine in Opaque Industries? Evidence from European Banking (May 19, 2020). Available at SSRN: https://ssrn.com/abstract=3605480 or http://dx.doi.org/10.2139/ssrn.3605480

Benoit D'Udekem (Contact Author)

Université Libre de Bruxelles (ULB) - Solvay Brussels School of Economics and Management - Centre Emile Bernheim (CEB) ( email )

ULB - Campus du Solbosch
Avenue F.D. Roosevelt 42
Brussels, B-1050
Belgium

Analysis Group, Inc. ( email )

111 Huntington Avenue
10th floor
Boston, MA 02199
United States

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