The Value of Differing Points of View: Evidence from Financial Analysts’ Geographic Diversity

William C. Gerken, Marcus O. Painter

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

Using satellite imagery of retail firms’ parking lots to measure time-varying local firm-specific performance, we document that analysts incorporate local information into their forecasts. Analysts rely more on local signals when less firm-wide information is available. This incorporation of noisy local firm information has firm-level implications. Examining across industries, we find causal evidence that geographic concentration of analysts increases consensus forecast errors and decreases firm liquidity. These effects are stronger for harder-to-value stocks. The market values geographic firm information, as the abnormal return around forecast revisions is higher for analysts who cover a firm from a unique location.

Original languageEnglish
Pages (from-to)409-449
Number of pages41
JournalReview of Financial Studies
Volume36
Issue number2
DOIs
StatePublished - 2023

Bibliographical note

Publisher Copyright:
© The Author(s) 2022. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved.

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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