Jurnal of Finance - Before an Analyst Becomes an Analyst: Does Industry Experience Matter ?
DANIEL BRADLEY, SINAN GOKKAYA, XI LIU
ABSTRACT
Using hand-collected biographical information on
financial analysts from 1983 to 2011, we find that analysts making forecasts on
firms in industries related to their preanalyst experience have better forecast
accuracy, evoke stronger market reactions to earning revisions, and are more
likely to be named Institutional Investor all-stars. Plausibly exogenous losses
of analysts with related industry experience have real financial market
implications—changes in firms’ information asymmetry and price reactions are
significantly larger than those of other analysts. Overall, industry expertise
acquired from preanalyst work experience is valuable to analysts, consistent
with the emphasis placed on their industry knowledge by institutional
investors.
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