Analysts' Technological Expertise

40 Pages Posted: 1 May 2016 Last revised: 8 Apr 2019

See all articles by Hongping Tan

Hongping Tan

McGill University

Jin Wang

Wilfrid Laurier University - Lazaridis School of Business & Economics

Li Yao

Concordia University, Quebec

Date Written: April 2019


While a firm’s success increasingly relies on technological innovation, little is known, however, about whether and how analysts utilize information about a firm’s technological innovation for their information production. We construct technological expertise for each analyst-firm pair based on the technological proximity between the firm and other firms covered by the analyst. We find that technological expertise increases the likelihood and timeliness for analysts to cover a firm. It also increases their earnings forecast accuracy and recommendation profitability, especially for firms with more intensive research activities and greater growth opportunities. Technological expertise is distinct from industry specialization, and could substitute industry specialization in analysts’ coverage decisions. Our findings suggest that technological expertise is an important analyst trait that affects analysts’ coverage decisions and forecast performance.

Keywords: Technological expertise, patents, analyst coverage, forecast accuracy, recommendation profitability, timeliness, commonality, industry specialization

JEL Classification: G14, M40, M41

Suggested Citation

Tan, Hongping and Wang, Jin and Yao, Li, Analysts' Technological Expertise (April 2019). Available at SSRN: or

Hongping Tan (Contact Author)

McGill University ( email )

1001 Sherbrooke St. West
Montreal, Quebec H3A1G5 H3A 2M1

Jin Wang

Wilfrid Laurier University - Lazaridis School of Business & Economics ( email )

Waterloo, Ontario N2L 3C5

Li Yao

Concordia University, Quebec ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1MB

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