Analysts’ stock recommendations are coloured by their cultural biases
This is especially true when they evaluate firms named after their country of domicile
THE “SELL-SIDE” equity analysts who work for investment banks are often accused of being less than completely objective. Because they need to maintain close ties with the companies they cover, they may be too eager to accept managers’ rosy earnings projections. They might also feel pressure to talk up a firm’s prospects because their banks stand to profit from underwriting fees. But professional and economic incentives are not the only possible sources of bias. A new working paper by Vesa Pursiainen of the University of Hong Kong argues that sell-side analysts are also swayed by national prejudices.
This article appeared in the Graphic detail section of the print edition under the headline "Price and prejudice"
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