Time: 13:30, Oct.31, 2017 (Tuesday)　

Venue: Room 503, Starr Building

Moderator:  Prof. Hongqi YUAN　

Topic: What is Local Information Advantage? The Institutional Knowledge of Analysts in Local versus Foreign Brokerage Firms in China

Speaker: Tianyu Zhang  (The Chinese University of Hong Kong)

Abstract: Using a topical-modeling technique (Latent Dirichlet Allocation) in textual analysis, we examine the contents of the analyst reports of 403 firms listed in the domestic markets of China. By comparing the relative forecast accuracy of analysts from local brokerages (local analysts) and their counterparts from foreign brokerages (foreign analysts), we show that local analysts have information advantage over the foreign analysts. The local analysts’ superior forecast accuracy is positively associated with the proportion of topics related to politics and government policies in their reports. This positive association is stronger among firms that are either state-owned or receiving government subsidies. However, when the firms that the analysts follow have high overseas sales (top 5% in the sample), foreign analysts can outperform local analysts in forecast accuracy and the foreign analysts’ superior accuracy is greater as they report more on topics pertaining to financial and profitability ratios of the firms.