No. 147: Seeing People: The Selective Attention of Financial Analysts in their Research Output

We study how analysts’ attention towards people is associated with their research outcomes. To measure this person orientation of analysts, we count the frequency of individual names mentioned in their reports. Analysts who exhibit a higher degree of person orientation tend to ask more questions related to individuals during earnings calls and provide more comments on management turnover in their reports. Compared to nonperson-oriented analysts, these individuals perform better in terms of All-Star status, earnings forecast accuracy, and forecast error consistency. Furthermore, they generate higher long-term returns (ranging from 41 to 53 basis points) from their stock recommendations, although no significant differences are observed in short-term returns, implying that investors do not immediately recognize the superior information content present in the reports of person-oriented analysts. We attribute these findings to the improved abilities of person-oriented analysts in acquiring and processing personrelated information, rather than having better access to private information through closer personal ties with executives.