Financial Analysts' Performance: Sector Versus Country Specialization

Author: Sonney, Frdric

Source: Review of Financial Studies, Volume 22, Number 5, 3 May 2009 , pp. 2087-2131(45)

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Abstract:

Brokerage houses normally structure their research activities along either country or sector lines. I investigate whether organizational structure affects the quality of financial analysts' earnings forecasts. Specifically, I compare the performance of country-specialized financial analysts with that of sector-specialized financial analysts. The former issue forecasts considerably more accurately than the latter. Country specialists benefit from an informational advantage over sector specialists. A superior knowledge of country-specific factors, as well as geographical proximity between analysts and the firms they cover, are significant determinants of this advantage.

Keywords: G15; G24; M41

Document Type: Research article

DOI: http://dx.doi.org/10.1093/rfs/hhm024

Publication date: 2009-05-03

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The Review of Financial Studies is a major forum for the promotion and wide dissemination of significant new research in financial economics. As reflected by its broadly based editorial board, the Review balances theoretical and empirical contributions. The primary criteria for publishing a paper are its quality and importance to the field of finance, without undue regard to its technical difficulty. Finance is interpreted broadly to include the interface between finance and economics. The Review is sponsored by The Society for Financial Studies. The editors of the Review and officers of the Society are elected for limited terms.