AFFI International Conference 2017

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Do Star Analysts Shine in Opaque Industries? Evidence from European Banking

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We assess the influence on stock prices of 5,150 changes in analyst recommendations on 80 European banks between 2005 and 2012. Unlike in other industries, recommendation changes made by skilled analysts are not likelier to influence stock prices; those made by star analysts induce sharp negative price revaluations. We conclude that opaqueness impedes the ability of analysts to influence investors and that stars contribute to uncovering hidden firm-specific bad news. Also, stars maintain an influence by focusing on selected large, complex institutions that generate disagreement among analysts and by being apt at identifying mispricings.


Benoit d'Udekem    
Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim


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