Analyst Team Diversity and Analyst Performance

Posted: 19 Feb 2021

See all articles by Xianjie He

Xianjie He

Shanghai University of Finance and Economics - School of Accountancy

Joanne Horton

University of Warwick - Warwick Business School

Oliver M. Rui

China Europe International Business School (CEIBS)

Shan Wu

Nanjing University

Date Written: December 18, 2020

Abstract

We examine the impact of informational and social analyst team diversity on forecast performance. We find that informational diversity is associated with less timely forecasts, whilst it is associated with more accurate forecasts. These findings are consistent with the group dynamics literature which indicates that the more diversified the skillsets of individuals the more beneficial their decision-making. Further analysis indicates the benefits of diversity is more pronounced when the forecast firm is more complex, but moderated when the brokerage house has greater access to proprietary information. We also find informational diversity decrease an analyst’s probability of gaining star status, confirming the benefits of a homophilic environment. Overall, our findings suggest that whichever is the greater need, accuracy or timeliness, will govern the choice of whether to build an informationally diverse analyst team.

Keywords: Analyst teams, informational diversity, social diversity, forecast accuracy, forecast timeliness, star analysts

JEL Classification: G20, G23, G24, M14

Suggested Citation

He, Xianjie and Horton, Joanne and Rui, Oliver M. and Wu, Shan, Analyst Team Diversity and Analyst Performance (December 18, 2020). Available at SSRN: https://ssrn.com/abstract=3751131

Xianjie He

Shanghai University of Finance and Economics - School of Accountancy ( email )

No. 777 Guoding Road, Shanghai
Shanghai, 200433
China

Joanne Horton

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Oliver M. Rui

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

HOME PAGE: http://https://www.ceibs.edu/rui-oliver

Shan Wu (Contact Author)

Nanjing University ( email )

22 Hankou Road
Nanjing, Jiangsu 210093 210093
China

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