What Do Questions Reveal? Analyst Topic-Specific Skill and Forecast Accuracy

64 Pages Posted: 8 Jan 2021

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, 2020

Abstract

Existing studies identify analyst skills by ex post evaluation of their outputs (forecasts and recommendations), which are contaminated by luck and noise. Using the premises that questions reveal interest and that interest and practice lead to skill, we construct an ex ante analyst topic-specific skill measure based on the frequency of topic-specific questions that analysts raise during previous earnings conference calls. In a supply chain information setting, we show that analysts with supply-chain-specific skill experience a greater improvement in forecast accuracy relative to their peers when the firms they cover establish relationships with important supply chain partners. Analysts with supply-chain-specific skill improve information efficiency in capital markets, as shown by faster information diffusion speed along the supply chain and stronger market reactions to their recommendation updates.

Keywords: Analyst Forecast, Topic-Specific Skills, Supply Chain

JEL Classification: G24, D83, J24

Suggested Citation

Cen, Ling and Han, Yanru and Harford, Jarrad, What Do Questions Reveal? Analyst Topic-Specific Skill and Forecast Accuracy (September 1, 2020). 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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