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Star power: A quasi-natural experiment on how analyst status affects recommendation performance

Author

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  • Zhan, Baoqiang
  • Wu, Chong

Abstract

We investigate the impact of analyst status on recommendation performance. Using 281,886 analyst recommendations from Chinese stock markets from 2007 to 2022, we employ a quasi-experiment approach by leveraging the star analyst election and utilize a time-varying difference-in-differences model to examine the difference in cumulative abnormal returns resulting from analyst recommendations before and after the election. Our findings reveal that when analysts are promoted to star status, the stocks they recommend exhibit improved performance. Interestingly, the star effect is particularly pronounced for analysts working in small brokerage firms and persists even during the economic shocks.

Suggested Citation

  • Zhan, Baoqiang & Wu, Chong, 2024. "Star power: A quasi-natural experiment on how analyst status affects recommendation performance," Finance Research Letters, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011649
    DOI: 10.1016/j.frl.2023.104792
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    More about this item

    Keywords

    Analyst status; Recommendation performance; Analyst reports; Difference-in-differences;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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