Abstract
Using 1994-2009 data, we document that All-American (AA) analysts’ buy and sell recommendations outperform those of non-AAs by over 7% per annum after risk-adjustments. This performance differential exists both before and after AAs are elected, does not exhibit long-run reversal, and is not significantly eroded by Reg-FD. Election to top-AA ranks predicts performance in buy recommendations above and beyond other observable analyst characteristics. Conflicts-of-interest reforms around 2002-2003 led to departures of experienced and high-performing AAs from the sell-side analyst pool; as a response, institutional investors shuffled the AA pool in a way that helped preserve the AA pool’s performance. Collectively, these results suggest that skill differences among analysts exist and the AA status incorporates institutional investors’ ability to evaluate analysts.
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