What trend is an analysts' friend? How overall market conditions affect the competitiveness of financial analysts
2017 (English)Report (Other academic)
This study documents how a shift in economic conditions triggered by the financial crisis of 2007-2009 and a post-crisis “uncertainty” period of 2010-2013 impacts the competitiveness of sell-side security analysts. I use a change in turnover of rankings as a measure of transformation in analysts’ competitive advantages in order to show how different ranking systems capture analysts’ ability to handle the changes in the economic environment. The results show that Institutional Investor’s stars, elected based on buy-side votes and valued primarily for the “helpfulness” of those analysts, experience an increase in turnover after the financial crisis and that they issue significantly less-profitable investment recommendations during high uncertainty periods. At the same time, objectively selected analysts in rankings based on either accuracy of earnings forecasts or profitability of recommendations, do not show any clear pattern of an impact of the crisis (or uncertainty) on the turnover of stars and on the profitability of their recommendations. The study concludes that the stock-picking skill of analysts is independent of market conditions, while buy-side clients view the “helpfulness” of analysts differently during different economic conditions.
Place, publisher, year, edition, pages
2017. , 21 p.
IdentifiersURN: urn:nbn:se:kth:diva-205283OAI: oai:DiVA.org:kth-205283DiVA: diva2:1088234
QC 201704122017-04-112017-04-112017-04-27Bibliographically approved