Are Wall Street Analyst Rankings Popularity Contest?

41 Pages Posted: 17 Mar 2006 Last revised: 19 Oct 2014

See all articles by Douglas R. Emery

Douglas R. Emery

University of Miami - Department of Finance

Xi Li

University of Arkansas - Department of Finance

Date Written: August 1, 2007

Abstract

We investigate the (sell-side) analyst rankings of Institutional Investor (I/I) and The Wall Street Journal (WSJ) using data from 1993-2005. We find that factors with a primary component of recognition are the most important determinants of the rankings, although performance measures are statistically significant determinants in some cases. The single exception to this finding is with existing WSJ stars, where industry-adjusted-investment-recommendation performance is the only significant determinant of repeating as a star. Further, in the year after becoming stars, the recommendations of WSJ stars are significantly worse than those of non-stars; and the recommendations and earnings forecasts of I/I stars, as well as the earnings forecasts of WSJ stars, are not significantly different from those of non-stars. We conclude that these rankings are largely "popularity contests."

Keywords: analyst, all-star, All-American, Institutional Investor, Wall Street Journal, earnings forecasts, recommendation

JEL Classification: G24, J30

Suggested Citation

Emery, Douglas R. and Li, Xi, Are Wall Street Analyst Rankings Popularity Contest? (August 1, 2007). Journal of Financial and Quantitative Analysis 44, 411-437, 2009. , Available at SSRN: https://ssrn.com/abstract=687362 or http://dx.doi.org/10.2139/ssrn.687362

Douglas R. Emery

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States
305-284-4362 (Phone)

Xi Li (Contact Author)

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

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