Security analysts as frame-makers
AbstractIn this paper we explore the mechanisms that allow securities analysts to value companies in contexts of Knightian uncertainty, that is, in the face of information that is unclear, subject to unforeseeable contingencies or to multiple interpretations. We address this question with a grounded-theory analysis of the reports written on Amazon.com by securities analyst Henry Blodget and rival analysts during the years 1998-2000. Our core finding is that analysts' reports are structured by internally consistent associations that include categorizations, key metrics and analogies. We refer to these representations as calculative frames, and propose that analysts function as frame-makers - that is, as specialized intermediaries that help investors value uncertain stocks. We conclude by considering the implications of frame-making for the rise of new industry categories, analysts' accuracy, and the regulatory debate on analysts'independence.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 733.
Date of creation: Jan 2004
Date of revision: Sep 2005
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Web page: http://www.econ.upf.edu/
Securities analysts; calculative frames; economic sociolgy;
Find related papers by JEL classification:
- L84 - Industrial Organization - - Industry Studies: Services - - - Personal, Professional, and Business Services
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-05-26 (All new papers)
- NEP-CBE-2004-05-16 (Cognitive & Behavioural Economics)
- NEP-FIN-2004-05-16 (Finance)
- NEP-HPE-2004-05-16 (History & Philosophy of Economics)
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