The Value of Analysts' Recommendations and the Organization of Financial Research

EFA 2006 Zurich Meetings

Review of Finance, Forthcoming

56 Pages Posted: 7 Apr 2006 Last revised: 28 Jun 2010

See all articles by Carolina Salva

Carolina Salva

University of Neuchatel

Frederic Sonney

University of Neuchatel and SFI (FAME)

Date Written: June 15, 2010

Abstract

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

Salva, Carolina and Sonney, Frederic, The Value of Analysts' Recommendations and the Organization of Financial Research (June 15, 2010). EFA 2006 Zurich Meetings, Review of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=892569 or http://dx.doi.org/10.2139/ssrn.892569

Carolina Salva (Contact Author)

University of Neuchatel ( email )

AL Breguet 2
CH-2000 Neuchatel
Switzerland

Frederic Sonney

University of Neuchatel and SFI (FAME) ( email )

Fbg de l'Hopital 77
Neuchatel, 2000
Switzerland

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