When do sell-side analysts switch industries they follow?

ABSTRACT

Between 1984 and 2014 over 3400 sell-side analysts changed the primary industry they followed. This article documents that analysts are more likely to change their industries when their absolute and relative forecasting accuracy in that industry is low and when the accuracy in the new industry is high. Analysts are more likely to switch industries at the beginning of their careers, after a recent change of an employing brokerage house, and if they have a history of switching industries before. Analysts are less likely to make a switch when their forecasting activity in the industry is high, when the industry is followed by many analysts and when they are employed by a top brokerage house.

KEYWORDS:

• Analysts’ forecasts
• analysts’ accuracy
• security analysts’ portfolio
• financial analysts
• security analysts
• financial analysts’ industry

JEL CLASSIFICATION:

• G11
• G14
• G24
• M41

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ In unreported regressions we find that the results are robust when we drop and use all five types instead.