Peer Effects in Equity Research

Journal of Financial and Quantitative Analysis accepted

72 Pages Posted: 4 Aug 2020 Last revised: 25 Aug 2021

See all articles by Kenny Phua

Kenny Phua

University of Technology Sydney

Chishen Wei

Hong Kong Polytechnic University - School of Accounting and Finance

T. Mandy Tham

Nanyang Technological University (NTU); Singapore Management University - Lee Kong Chian School of Business

Date Written: July 1, 2021

Abstract

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

Phua, Jing Wen Kenny and Wei, Chishen and Tham, Tze-Minn and Tham, Tze-Minn, Peer Effects in Equity Research (July 1, 2021). Journal of Financial and Quantitative Analysis accepted, Available at SSRN: https://ssrn.com/abstract=3643425 or http://dx.doi.org/10.2139/ssrn.3643425

Jing Wen Kenny Phua

University of Technology Sydney ( email )

Building 8, 14-18 Ultimo Road, Ultimo
Sydney, 2050
Australia

Chishen Wei (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

Tze-Minn Tham

Nanyang Technological University (NTU) ( email )

S3 B1b-61 Nanyang Avenue
Singapore, 639798
Singapore
65-67906049 (Phone)

Singapore Management University - Lee Kong Chian School of Business ( email )

50 Stamford Road
Singapore 178899
Singapore

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

Paper statistics

Downloads
316
Abstract Views
1,358
Rank
182,003
PlumX Metrics