Learning about analysts

R�diger, Jesper; Vigier, Adrien

Abstract

We examine an analyst with career concerns making cheap talk recommendations to a sequence of traders, each of whom possesses private information concerning the analyst's ability. The recommendations of the analyst influence asset prices that are then used to evaluate the analyst. An endogeneity problem thus arises. In particular, if the reputation of the analyst is sufficiently high then an incompetent but strategic analyst is able to momentarily hide her type. An equilibrium in which the market eventually learns the analyst type always exists. However, under some conditions, an equilibrium also exists in which the incompetent analyst is able to hide her type forever.

Citation

Rüdiger, J., & Vigier, A. (2019). Learning about analysts. Journal of Economic Theory, 180, 304-335. https://doi.org/10.1016/j.jet.2019.01.001

• Journal Article Type: Article
• Acceptance Date: Jan 10, 2019
• Online Publication Date: Jan 18, 2019
• Publication Date: 2019-03
• Deposit Date: Sep 18, 2020
• Publicly Available Date: Sep 18, 2020
• Journal: Journal of Economic Theory
• Print ISSN: 0022-0531
• Electronic ISSN: 1095-7235
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 180
• Pages: 304-335
• DOI: https://doi.org/10.1016/j.jet.2019.01.001
• Keywords: AnalystsCareer concernsReputationsSocial learning
• Public URL: https://nottingham-repository.worktribe.com/output/4913044
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0022053119300055
• Additional Information: This article is maintained by: Elsevier; Article Title: Learning about analysts; Journal Title: Journal of Economic Theory; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jet.2019.01.001; Content Type: article; Copyright: © 2019 The Authors. Published by Elsevier Inc.