Behavioral Finance

Sell-Side Analysts and Gender: A Comparison of Performance, Behavior, and Career Outcomes

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Sell-Side Analysts and Gender: A Comparison of Performance, Behavior, and Career Outcomes

Sell-side analysts are prominent figures in the investment arena. Investors make enormous efforts to identify those analysts with better earnings forecasts and investment recommendations, and are willing to pay considerable sums for access to star analyst research.

Using a large sample of investment recommendations from January 1994 through December 2005, we examine whether female sell-side analysts perform and behave differently from their male counterparts. We also examine whether the career outcomes of female analysts differ from those of male analysts, after controlling for analyst performance and behavior.

Specifically, we compare male and female analysts in terms of their (i) performance, as measured by the excess return (alpha) of investment recommendations, (ii) risk-taking, measured as the portfolio residual risk implied by investment recommendations, (iii) bias, measured as the percentage of sell recommendations, and (iv) career outcomes, measured as the probability of moving among brokerage firms of different sizes and by the probability of being an Institutional Investor or Wall Street Journal star.

As compared to male analysts, we find that the investment recommendations of female analysts produce similar abnormal returns but with less idiosyncratic risks. Taken together, our results imply that the recommendations of female analysts may generate slightly higher information ratios, a finding consistent with prior research on individual investors.

Further, we detect no evidence of discrimination against female analysts regarding their career outcomes. In fact, female analysts seem to have a better chance of being recognized as star analysts in both Institutional Investor magazine and the Wall Street Journal rankings, influential components of analysts’ compensation.

Published in

Financial Analysts Journal

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This material is not research and should not be treated as research. This paper does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of AQR. The views expressed reflect the current views as of the date hereof and neither the author nor AQR undertakes to advise you of any changes in the views expressed herein. 

The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. Charts and graphs provided herein are for illustrative purposes only. The information in this presentation has been developed internally and/or obtained from sources believed to be reliable; however, neither AQR nor the author guarantees the accuracy, adequacy or completeness of such information. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. There can be no assurance that an investment strategy will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially, and should not be relied upon as such. Diversification does not eliminate the risk of experiencing investment losses.

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