What Do Questions Reveal? Analyst Topic-Specific Skill and Forecast Accuracy

Existing studies identify analyst skills by ex post evaluation of their outputs (forecasts and recommendations), which are contaminated by luck and noise. Using the premises that questions reveal interest and that interest and practice lead to skill, we construct an ex ante analyst topic-specific skill measure based on the frequency of topic-specific questions that analysts raise during previous earnings conference calls. In a supply chain information setting, we show that analysts with supply-chain-specific skill experience a greater improvement in forecast accuracy relative to their peers when the firms they cover establish relationships with important supply chain partners. Analysts with supply-chain-specific skill improve information efficiency in capital markets, as shown by faster information diffusion speed along the supply chain and stronger market reactions to their recommendation updates.