Peer Effects Among Financial Analysts

We hypothesize that the arrival of star analysts improves the performance of incumbent financial analysts, while the departure of star analysts has the opposite effect. Our results consistent with this hypothesis are concentrated primarily in the tests related to star arrivals. Our findings are robust to an instrumental variable approach and a falsification test. In addition, we hypothesize that the impact of the arrival/departure of star analysts is more pronounced when the star analyst covers the same industry as the incumbents (especially for industries with high uncertainty), when the star analyst is more established, when the incumbent analysts are less experienced, and when the brokerage house has fewer existing star analysts. Overall, our paper offers evidence of peer effects among financial analysts, mainly through the arrival of star analysts.