The Value of Analysts' Recommendations and the Organization of Financial Research
Review of Finance, Forthcoming
56 Pages Posted: 7 Apr 2006 Last revised: 28 Jun 2010
Date Written: June 15, 2010
Brokerage houses usually organize their research activities by country or economic sector. We evaluate which research structure provides most value to investors. To do so, we study the relative information content of recommendations issued by country-specialized analysts and sector-specialized analysts. Our findings show that the former issue more valuable recommendations. The strength of country-specific commonalities and institutional factors explain at least part of the better performance of country-specialized financial analysts. Although analysts’ geographic location has been shown in the literature to be a significant determinant of earnings forecast accuracy, its relevance is more subtle when it comes to stock recommendations.
Keywords: financial analysts, stock recommendations, country and sector factors, geography
JEL Classification: G1, G29, D82
Suggested Citation: Suggested Citation