The Reluctant Analyst

Dan Bernhardt, Chi Wan, Zhijie Xiao

Research output: Contribution to journalArticlepeer-review


We estimate the dynamics of recommendations by financial analysts, uncovering the determinants of inertia in their recommendations. We provide overwhelming evidence that analysts revise recommendations reluctantly, introducing frictions to avoid frequent revisions. More generally, we characterize the sources underlying the infrequent revisions that analysts make. Publicly available data matter far less for explaining recommendation dynamics than do the recommendation frictions and the long-lived information that analysts acquire but the econometrician does not observe. Estimates suggest that analysts structure recommendations strategically to generate a profitable order flow from retail traders. We provide extensive evidence that our model describes how investors believe analysts make recommendations, and that investors value private information revealed by analysts' recommendations.

Original languageEnglish (US)
Pages (from-to)987-1040
Number of pages54
JournalJournal of Accounting Research
Issue number4
StatePublished - Sep 1 2016


  • G2
  • G24
  • MCMC methods
  • asymmetric frictions
  • duration
  • financial analyst recommendations
  • recommendation revisions
  • recommendation stickiness

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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