Reputation and Performance Among Security Analysts



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    • School of Business Administration, La Salle University. I wish to express my gratitude to the following: Larry Brown, Vic Defeo, Bob Holthausen, Don Lewin, Dave Mayers, Pat O'Brien, Jim Ohlson, K. Ramesh, René Stulz, an anonymous referee, and workshop participants at Columbia, Duke, Illinois at Chicago, Northwestern, Rutgers, Salisbury State, SUNY at Buffalo, Villanova, and Wharton for helpful comments; the KPMG Peat Marwick Foundation and Deloitte & Touche for financial support; Mark Millender for research assistance; and Zacks Investment Research, Inc. for supplying the analyst forecasts.


Members of the Institutional Investor All-American Research Team supply more accurate earnings forecasts than other analysts when forecasts are matched by the corporation followed and by the date of brokerage house issuance. This contemporaneous advantage is complemented by a timing advantage; All-Americans supply forecasts more often than other analysts. Stocks returns immediately following large upward forecast revisions suggest that All-Americans impact prices more than other analysts. However, there is virtually no difference in returns following large downward revisions. Nevertheless, the collective results suggest a positive relation between reputation and performance, and, assuming that All-Americans are better paid, pay and performance.