The value of analysts’ recommendations and the organization of financial research

C. Salva and F. Sonney
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F. Sonney: Vlerick Leuven Gent Management School

Vlerick Leuven Gent Management School Working Paper Series from Vlerick Leuven Gent Management School

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 explains at least part of the better performance of country-specialized financial analysts. Surprisingly, although analysts’ geographic location has been shown in the literature to be a determinant of earnings forecast accuracy, it is not a source of a comparative advantage when it comes to stock recommendations.

Keywords: financial analysts; stock recommendations; country and sector factors; geography (search for similar items in EconPapers)
JEL-codes: D82 G1 G29 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2009-04-04
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