What Do Questions Reveal? Skill Acquisition, Detection, and Recognition in the Capital Markets

79 Pages Posted: 8 Jan 2021 Last revised: 3 Oct 2022

See all articles by Ling Cen

Ling Cen

The Chinese University of Hong Kong

Yanru Han

The Chinese University of Hong Kong (CUHK) - Department of Finance

Jarrad Harford

University of Washington; European Corporate Governance Institute (ECGI)

Date Written: September 1, 2021

Abstract

We construct an ex ante topic-specific skill measure based on the frequency of topic-specific questions that analysts raised in past earnings conference calls. In a supply chain information setting, we show that analysts with supply-chain-specific skill achieve a greater improvement in forecast accuracy relative to their peers when the firms experience firm-specific or market-wide supply-chain shocks. Analysts acquire skills through cross-brokerage learning and within-brokerage coaching. While brokerage firms do not assign tasks according to topic-specific skills, evidence based on the market reactions to recommendation updates and the information diffusion speed along the supply chain suggests that investors do recognize these skills. Overall, we provide a generalizable method that penetrates the black box of information processing and study the skill acquisition, detection, and diffusion in the capital market.

Keywords: Topic-Specific Skills; Information Processing; Supply Chain

JEL Classification: G24, D83, J24

Suggested Citation

Cen, Ling and Han, Yanru and Harford, Jarrad, What Do Questions Reveal? Skill Acquisition, Detection, and Recognition in the Capital Markets (September 1, 2021). Available at SSRN: https://ssrn.com/abstract=3730815 or http://dx.doi.org/10.2139/ssrn.3730815

Ling Cen (Contact Author)

The Chinese University of Hong Kong ( email )

CYT Building
Sha Tin
Hong Kong, Hong Kong
Hong Kong

HOME PAGE: http:///sites.google.com/site/cenling/

Yanru Han

The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )

Shatin, N.T.
Hong Kong

Jarrad Harford

University of Washington ( email )

Box 353226
Seattle, WA 98195-3226
United States
206-543-4796 (Phone)
206-543-7472 (Fax)

HOME PAGE: http://faculty.washington.edu/jarrad/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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