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Professional Connections within Analyst Teams and Forecast Accuracy

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Title:Professional Connections within Analyst Teams and Forecast Accuracy
Authors:Wu, Xianjiao
Hong, Hong
Ye, Qiang
Keywords:Crowd-based Platforms
eps decrease
forecast accuracy
professional connections
security analysts
Date Issued:07 Jan 2020
Abstract:Understanding factors associated with the performance of the sell-side analyst is of great value in both theory and practice. We profile the crucial influence of professional connections among security analysts on generating earnings forecast in this study based on a dataset of analysts’ employment history obtained from the Securities Association of China and analysts’ history forecasts obtained from CSMAR. By estimating a multivariate linear regression model, we find that professional connections within analyst teams are positively associated with earnings forecast accuracy. The results of Fisher's Permutation test further confirm that the effect of professional connections on analyst forecast quality is stronger when firms covered are facing decreasing EPS. Our results still hold for additional analyses with an alternative measure for professional connections. In conclusion, this work confirms the significant role of professional connections in information sharing and mutual understanding among analysts.
Pages/Duration:10 pages
Rights:Attribution-NonCommercial-NoDerivatives 4.0 International
Appears in Collections: Crowd-based Platforms

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