{"id":77395,"date":"2019-02-25T03:03:08","date_gmt":"2019-02-25T02:03:08","guid":{"rendered":"http:\/\/beta.next-finance.net\/note\/stock-market-shows-greater-reaction-to-forecasts-by-analysts-with-favourable-surnames\/"},"modified":"2019-02-25T03:03:08","modified_gmt":"2019-02-25T02:03:08","slug":"stock-market-shows-greater-reaction-to-forecasts-by-analysts-with-favourable-surnames","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/note\/stock-market-shows-greater-reaction-to-forecasts-by-analysts-with-favourable-surnames\/","title":{"rendered":"Stock market shows greater reaction to forecasts by analysts with favourable surnames"},"content":{"rendered":"

Research finds investors dismiss analysis from those who have less favourable surnames<\/strong> <\/em><\/p>\n

Financial analysts whose surnames are perceived as favourable elicit stronger market
\nreactions to their earnings forecasts, new research from Cass Business School has found.<\/p>\n

The researchers found that following the 9\/11 terrorist attacks, market reactions weakened
\nfor forecasts from analysts with Middle Eastern surnames. They also found that following the
\nFrench and German governments\u2019 opposition to the US-led Iraq War, the US market
\nreactions weakened for analysts with French or German surnames. This effect was stronger
\nin firms with lower institutional ownership and for analysts with non-American first names.<\/p>\n

The researchers measured surname favourability using the US historical immigration
\nrecords to identify countries of origin associated with a particular surname and the Gallup
\nsurvey data on Americans\u2019 favourability toward foreign countries.<\/p>\n

Dr Jay Jung, assistant professor of accounting at Cass Business School, said surname
\nfavourability was not associated with forecast quality such as accuracy, bias, and timeliness
\nbut rather it suggested the investors made biased judgements based on their perception of
\nanalysts\u2019 surnames.<\/p>\n

\u201cOur finding is consistent with the prediction based on motivated reasoning that people have
\na natural desire to draw conclusions that they are motivated to reach. If investors have
\nfavourable views toward an analyst due to his or her surname, they are motivated to assess
\nthe analyst\u2019s forecasts as being more credible or of higher quality because it reduces the
\nunpleasant inconsistency between their attitudes and judgments,\u201d said Dr Jung.<\/p>\n

Dr Jung said surname favourability did have a complementary effect on analysts\u2019 career
\noutcomes, helping analysts prosper in their profession.<\/p>\n

\u201cWe found that, conditional on good forecasting performance, having a favourable surname
\nmade it more likely for an analyst to get elected as an All-Star analyst and survive in the
\nprofession when his or her brokerage house went out of business or went through a M&A
\n(mergers and acquisition) process,\u201d he adds.<\/p>\n

Dr Jung said surname favourability also had impact on price drifts in the stock market.
\n\u201cThe speed at which stock prices reacted to an analyst\u2019s forecasts was faster when the
\nanalyst had a favourable surname. We found significantly smaller delayed price responses.\u201d<\/p>\n

Dr Jung said the research demonstrated that investors\u2019 perception of an analyst\u2019 surname
\nnot only influences their information processing in capital markets but also affects market
\nefficiency and leads to different labour market consequences for finance professionals.
\n\u201cIt is quite interesting to see how the favorability of a surname, unrelated to the information
\ncontent or quality of an analyst\u2019s forecast, influences investor reaction and price anomalies
\nin the capital market.\u201d<\/p>\n

Read the paper<\/strong><\/p>\n

The research paper \u2018An Analyst by Any Other Surname: Surname Favorability and Market
\nReaction to Analyst Forecasts\u2019 is conditionally accepted for publication in the Journal of
\nAccounting and Economics.<\/em> Read the paper here.<\/p>\n

The authors are:<\/strong><\/p>\n