Seeing People: the selective attention of financial analysts in their research output

Abstract:
We study how analysts’ selective attention to people affects their research outputs. We measure analysts' person orientation by counting how many times they name individuals in their reports. Person-oriented analysts ask more people-related questions during earnings calls and comment more on management turnover than non-person-oriented analysts in their reports. These analysts outperform non-person-oriented analysts in All-Star status, earnings forecast accuracy, and forecast error consistency. They also generate higher long-term returns (41-53 basis points) from their stock recommendations but not short-term returns, implying that investors do not immediately recognize the superior information content of person-oriented analysts' reports. We attribute our findings to person-oriented analysts' superior abilities to acquire and process person-related information rather than better information access. Our study highlights the value of person orientation as a skill for financial analysts.