Do local analysts know more? A cross-country study of the performance of local analysts and foreign analysts

Kee-Hong Bae, René Stulz and Hongping Tan

Journal of Financial Economics, 2008, vol. 88, issue 3, 581-606

Abstract: This paper examines whether analysts resident in a country make more precise earnings forecasts for firms in that country than non-resident analysts. Using a sample of 32 countries, we find an economically and statistically significant local analyst advantage even after controlling for firm and analyst characteristics. The local advantage is high in countries where earnings are smoothed more, less information is disclosed by firms, and firm idiosyncratic information explains a smaller fraction of stock returns. It is negatively related to whether a firm has foreign assets and to market participation by foreign investors and by institutions, and positively related to holdings by insiders. The extent to which U.S. investors underweight a country's stocks is positively related to that country's local analyst advantage.

Date: 2008
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Related works:
Working Paper: Do Local Analysts Know More? A Cross-Country Study of the Performance of Local Analysts and Foreign Analysts (2006)
Working Paper: Do Local Analysts Know More? A Cross-Country Study of the Performance of Local Analysts and Foreign Analysts (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:88:y:2008:i:3:p:581-606

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