Reg Fd and the Competitiveness of All-Star Analysts

Abstract

We examine the impact of Regulation Fair Disclosure on the competitive advantage of All-Star analysts as measured by turnover in the rankings. Institutional Investor All-Americans, chosen by votes of institutional investors based on overall helpfulness, experienced a significant increase in turnover as Reg FD was implemented. Non-U.S. analysts and U.S. analysts ranked solely on the basis of public stock recommendations did not. Within a few years, however, All-American turnover returned to pre-Reg-FD levels, suggesting that the new All-Americans built a competitive advantage stressing aspects of performance less dependent on privileged communication.

Keywords: Reg FD, selective disclosure, All Stars, analysts, competition, analyst rankings, relative performance, stock recommendations, earnings estimates, All Americans, Best on the Street

JEL Classification: G11, G24, G29, M41