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

  • Chang, Charles

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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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 29 (2010)
Issue (Month): 6 (October)
Pages: 1094-1107

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Handle: RePEc:eee:jimfin:v:29:y:2010:i:6:p:1094-1107
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