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Information footholds: Isolating local presence as a factor in analyst performance and trading

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  • Chang, Charles

Abstract

I compare the performance of buy/hold/sell recommendations from foreign, local, and expatriate (foreigners with local operations) analysts in an emerging market. Location appears to be important: expatriate analysts significantly outperform foreign analysts. Expatriates also significantly outperform locals, implying that other factors such as global resources also play a role, and a variety of controls for the characteristics of the recommending firm does not alter findings. Trading based on expatriate recommendations generates significantly positive risk-adjusted returns. Furthermore, foreign and local institutional investors appear to trade on the superior information of expatriate analysts, even when it contradicts their own information.

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  • Chang, Charles, 2010. "Information footholds: Isolating local presence as a factor in analyst performance and trading," Journal of International Money and Finance, Elsevier, vol. 29(6), pages 1094-1107, October.
    • Handle: RePEc:eee:jimfin:v:29:y:2010:i:6:p:1094-1107
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    Cited by:

    1. Elisa Cavezzali & Jacopo Crepaldi & Ugo Rigoni, 2014. "Proximity to hubs of expertise and financial analyst forecast accuracy," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 4(2), pages 157-179, December.
    2. Xiaoxiao Song, 2019. "Effects Of Analysts’ Country Familiarity On Forecast Behavior: Evidence From Chinese Cross-Listed Firms In The United States," Accounting & Taxation, The Institute for Business and Finance Research, vol. 11(1), pages 35-46.
    3. Young‐Soo Choi & Svetlana Mira & Nicholas Taylor, 2022. "Local versus foreign analysts' forecast accuracy: does herding matter?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1143-1188, April.
    4. Farooq, Omar, 2013. "Who was informative? Performance of foreign and local analysts’ stock recommendations during the Asian financial crisis," Research in International Business and Finance, Elsevier, vol. 29(C), pages 61-76.
    5. O'Brien, Patricia C. & Tan, Hongping, 2015. "Geographic proximity and analyst coverage decisions: Evidence from IPOs," Journal of Accounting and Economics, Elsevier, vol. 59(1), pages 41-59.
    6. Chih-Hsiang Chang, 2017. "Exploring stock recommenders’ behavior and recommendation receivers’ sophistication," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(1), pages 1-26, January.
    7. Ching-Lung Chen & Chung-Yu Chen, 2018. "Do Weak Internal Controls Affect Institutional Ownership Decisions?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 21(03), pages 1-37, September.
    8. Agudelo, Diego A. & Byder, James & Yepes-Henao, Paula, 2019. "Performance and informed trading. Comparing foreigners, institutions and individuals in an emerging stock market," Journal of International Money and Finance, Elsevier, vol. 90(C), pages 187-203.

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