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Who are the Best? Local Versus Foreign Analysts on the Latin American Stock Markets

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Author Info

  • Jean-François Bachmann

    (RMF Investment Products, Quantitative Analysis Group)

  • Guido Bolliger

    (University of Neuchâtel and FAME, Institut de l’Entreprise)

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    Abstract

    This paper investigates the relative performance of local and foreign financial analysts on Latin American emerging markets. There is strong evidence that foreign financial analysts outperform local analysts on these markets. Foreign analysts produce more timely and more accurate forecasts. A significant price reaction is observed following their downward forecast revisions. Therefore foreign investors do not necessarily need to open relations with local financial analysts when they want to trade on these markets. The results are consistent with previous evidence that documents a better information and greater sophistication on the part of foreign investors on overseas markets.

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    File URL: http://www.swissfinanceinstitute.ch/rp75.pdf
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    Bibliographic Info

    Paper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp75.

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    Date of creation: Apr 2003
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    Handle: RePEc:fam:rpseri:rp75

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    Related research

    Keywords: analysts’ forecasts; home bias; international diversification; emerging markets; herding behaviour;

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    1. Cooper, Rick A. & Day, Theodore E. & Lewis, Craig M., 2001. "Following the leader: *1: a study of individual analysts' earnings forecasts," Journal of Financial Economics, Elsevier, vol. 61(3), pages 383-416, September.
    2. Michaely, Roni & Womack, Kent L, 1999. "Conflict of Interest and the Credibility of Underwriter Analyst Recommendations," Review of Financial Studies, Society for Financial Studies, vol. 12(4), pages 653-86.
    3. Lin, Hsiou-wei & McNichols, Maureen F., 1998. "Underwriting relationships, analysts' earnings forecasts and investment recommendations," Journal of Accounting and Economics, Elsevier, vol. 25(1), pages 101-127, February.
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