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The value of analysts’ recommendations and the organization of financial research

Author

Listed:
  • Salva, C.
  • Sonney, F.

    (Vlerick Leuven Gent Management School)

Abstract

Brokerage houses usually organize their research activities by country or economic sector. We evaluate which research structure provides most value to investors. To do so, we study the relative information content of recommendations issued by country-specialized analysts and sector-specialized analysts. Our findings show that the former issue more valuable recommendations. The strength of country-specific commonalities explains at least part of the better performance of country-specialized financial analysts. Surprisingly, although analysts’ geographic location has been shown in the literature to be a determinant of earnings forecast accuracy, it is not a source of a comparative advantage when it comes to stock recommendations.

Suggested Citation

  • Salva, C. & Sonney, F., 2009. "The value of analysts’ recommendations and the organization of financial research," Vlerick Leuven Gent Management School Working Paper Series 2009-10, Vlerick Leuven Gent Management School.
  • Handle: RePEc:vlg:vlgwps:2009-10
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    More about this item

    Keywords

    financial analysts; stock recommendations; country and sector factors; geography;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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