The Role of Stock Indices in Analyst Career Outcomes and Stock Recommendations

Stefan Pohl and Vesa Pursiainen
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Stefan Pohl: University of Zurich; Swiss Finance Institute
Vesa Pursiainen: University of St. Gallen; Swiss Finance Institute

No 23-50, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: Random changes in firms' stock index membership have important implications on sell-side analysts' career outcomes. Covered firms moving from the bottom of Russell 1000 to the top of Russell 2000 significantly increase an analyst's likelihood of moving to a high-status broker or receiving a career-first All-Star Analyst nomination - particularly for early-career analysts. This is reflected in analyst recommendations. For firms that are just above the index threshold - that might move to Russell 2000 if their share price decreases slightly - analyst recommendations are significantly more negative around the time of defining the index weights that determine index membership.

Keywords: Career concerns; analyst recommendations; index membership; bias; conflict of interest (search for similar items in EconPapers)
JEL-codes: G12 G14 G24 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2023-06
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2350

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