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Security analysts as frame-makers

  • Daniel Beunza Ibáñez
  • Raghu Garud

In 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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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 733.

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Date of creation: Jan 2004
Date of revision: Sep 2005
Handle: RePEc:upf:upfgen:733
Contact details of provider: Web page: http://www.econ.upf.edu/

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  1. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
  2. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  3. Arthur T. Denzau & Douglass C. North, 1993. "Shared Mental Models: Ideologies and Institutions," Economic History 9309003, EconWPA.
  4. Daniel Beunza & David Stark, 2004. "Tools of the trade: the socio-technology of arbitrage in a Wall Street trading room," Industrial and Corporate Change, Oxford University Press, vol. 13(2), pages 369-400, April.
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