Peer Effects in Equity Research
Journal of Financial and Quantitative Analysis accepted
72 Pages Posted: 4 Aug 2020 Last revised: 25 Aug 2021
Date Written: July 1, 2021
We study the importance of peer effects among sell-side analysts who work at the same brokerage house, but cover different firms. By mapping the information network within each brokerage, we identify analysts who occupy central positions in the network. Central analysts incorporate more information from their coworkers and produce better research. Using shocks to network structures around brokerage mergers, we identify the influence of peer effects and the importance of industry expertise on analysts' performance. A portfolio strategy that exploits the forecast revisions of central analysts earns up to 24% per annum.
Keywords: Peer Effects, Analysts, Limited Attention, Networks
JEL Classification: D83, G17, G24
Suggested Citation: Suggested Citation