The Field of Investment Advice: The Social Forces that Govern Equity Analysts

Crawford Spence; Yuval Millo; James Valentine

The Field of Investment Advice: The Social Forces that Govern Equity Analysts

Crawford Spence, Yuval Millo, James Valentine^*

^*Corresponding author for this work

Accounting & Financial Management

Research output: Contribution to journal › Article › peer-review

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Abstract

Literature on equity analysts presents a conundrum: analysts are seen as influential market participants, yet researchers widely criticize them for their bias and inaccuracy. Studies drawing from economic frames struggle to explain this. Therefore, we develop a new conceptualization that positions analysts as actors operating in a social field. Drawing on a qualitative study involving 70 interviews with analysts and portfolio managers, we offer two broad insights. Firstly, we identify long-term interpersonal and inter-institutional ties between buy-side and sell-side actors which contribute to social inertia in the field. Secondly, we illustrate how sell-side analysts’ social environment is dichotomous, pushing some to converge with consensus estimates, while encouraging others to diverge. Taken as a whole, our findings contribute to the accounting literature by enriching our understanding of the social and institutional forces that govern analyst behavior.

Original language	English
Number of pages	49
Journal	Accounting Review
Publication status	Accepted/In press - 12 May 2023

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title = "The Field of Investment Advice: The Social Forces that Govern Equity Analysts",

abstract = "Literature on equity analysts presents a conundrum: analysts are seen as influential market participants, yet researchers widely criticize them for their bias and inaccuracy. Studies drawing from economic frames struggle to explain this. Therefore, we develop a new conceptualization that positions analysts as actors operating in a social field. Drawing on a qualitative study involving 70 interviews with analysts and portfolio managers, we offer two broad insights. Firstly, we identify long-term interpersonal and inter-institutional ties between buy-side and sell-side actors which contribute to social inertia in the field. Secondly, we illustrate how sell-side analysts{\textquoteright} social environment is dichotomous, pushing some to converge with consensus estimates, while encouraging others to diverge. Taken as a whole, our findings contribute to the accounting literature by enriching our understanding of the social and institutional forces that govern analyst behavior. ",

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N2 - Literature on equity analysts presents a conundrum: analysts are seen as influential market participants, yet researchers widely criticize them for their bias and inaccuracy. Studies drawing from economic frames struggle to explain this. Therefore, we develop a new conceptualization that positions analysts as actors operating in a social field. Drawing on a qualitative study involving 70 interviews with analysts and portfolio managers, we offer two broad insights. Firstly, we identify long-term interpersonal and inter-institutional ties between buy-side and sell-side actors which contribute to social inertia in the field. Secondly, we illustrate how sell-side analysts’ social environment is dichotomous, pushing some to converge with consensus estimates, while encouraging others to diverge. Taken as a whole, our findings contribute to the accounting literature by enriching our understanding of the social and institutional forces that govern analyst behavior.

AB - Literature on equity analysts presents a conundrum: analysts are seen as influential market participants, yet researchers widely criticize them for their bias and inaccuracy. Studies drawing from economic frames struggle to explain this. Therefore, we develop a new conceptualization that positions analysts as actors operating in a social field. Drawing on a qualitative study involving 70 interviews with analysts and portfolio managers, we offer two broad insights. Firstly, we identify long-term interpersonal and inter-institutional ties between buy-side and sell-side actors which contribute to social inertia in the field. Secondly, we illustrate how sell-side analysts’ social environment is dichotomous, pushing some to converge with consensus estimates, while encouraging others to diverge. Taken as a whole, our findings contribute to the accounting literature by enriching our understanding of the social and institutional forces that govern analyst behavior.

M3 - Article

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JO - Accounting Review

JF - Accounting Review

ER -

The Field of Investment Advice: The Social Forces that Govern Equity Analysts

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