An Analyst by Any Other Last Name: Country Favorability and Market Reaction to Analyst Forecasts

Abstract

Using a survey-based measure of country favorability, we find that forecast revisions of analysts with last names associated with more favorable countries of origin generate stronger market reaction. This effect is amplified among (i) firms with lower institutional ownership, (ii) analysts with lower reputation or names whose country of origin can be easily identified, and (iii) downward forecast revisions. Further, the country favorability effect varies over time: Following the 9/11 attacks, market reaction to forecast revisions by analysts of Middle-Eastern origin is significantly weaker. The country favorability effect is not associated with forecast quality or career outcomes, and does not reflect the effects of cultural proximity or in-group bias.