Equity analyst social interactions and geographic information transmission

We find that earnings forecasts by analysts with more local peers, defined as analysts working in the same brokerage office who cover different firms headquartered in the same area, are more accurate. These heightened accuracy effects are concentrated in settings where local peers are particularly valuable, such as when analysts have less access to corporate management, when earnings are harder to forecast, and when analysts have stronger incentives to work hard. In examining the nature of the information transmitted by local peers, we find that earnings forecasts by analysts with more local peers better reflect negative geographic shocks in firm earnings. In addition, geographic momentum in stock returns is attenuated for firms that are followed by more local peers, especially when area returns are negative. These findings suggest that social interactions among local peer analysts facilitate the transmission of complex, soft information about geographic factors to investors.