Do Local Analysts Know More? A Cross-Country Study of the Performance of Local Analysts and Foreign Analysts

Kee-Hong Bae, Rene M. Stulz, Hongping Tan

NBER Working Paper No. 11697
Issued in October 2005
NBER Program(s):Asset Pricing

This paper examines whether analysts resident in a country make more precise earnings forecasts for firms in that country than analysts who are not resident in that country. Using a sample of 32 countries, we find that there is an economically and statistically significant analyst local advantage even after controlling for firm and analyst characteristics. The importance of the local advantage is inversely related to the quality of the information provided by firms. In particular, the local advantage is high in countries where earnings are smoothed more, less information is disclosed by firms, and firm idiosyncratic information explains a smaller fraction of stock returns. The local advantage is also negatively related to market participation by foreign investors and by institutions and positively related to holdings by insiders. U.S. investors underweight a country's stocks more in their portfolios if that country has a higher analyst local advantage.

download in pdf format
   (256 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11697

Published: Bae, Kee-Hong, Rene M. Stulz, and Hongping Tan. "Do local analysts know more? A cross-country study of performance of local analysts and foreign analysts." Journal of Financial Economics 88, 3 (2008): 581-606. citation courtesy of

Users who downloaded this paper also downloaded* these:
Loh and Stulz w14971 When are Analyst Recommendation Changes Influential?
Weisbenner and Ivkovich w9685 Local Does as Local Is: Information Content of the Geography of Individual Investors' Common Stock Investments
Asquith, Mikhail, and Au w9246 Information Content of Equity Analyst Reports
Bajari and Krainer w10665 An Empirical Model of Stock Analysts' Recommendations: Market Fundamentals, Conflicts of Interest, and Peer Effects
Hildebrand, Laing, and Rosenthal Prediction Analysis of Economic Models
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us