Author

Contributions

  • Frazzini, Andrea - Contributor
  • Malloy, Christopher J. - Contributor
  • Harvard Business School - Contributor

Publication

2008 - Harvard Business School, Boston, Massachusetts

Language

English

Word Count

11,500 words, Guess

Page Count

46 pages

Identifiers

Description

We study the impact of social networks on agents' ability to gather superior information about firms. Exploiting novel data on the educational backgrounds of sell-side equity analysts and senior officers of firms, we test the hypothesis that analysts' school ties to senior officers impart comparative information advantages in the production of analyst research. We find evidence that analysts outperform on their stock recommendations when they have an educational link to the company. A simple portfolio strategy of going long the buy recommendations with school ties and going short buy recommendations without ties earns returns of 5.40% per year. We test whether Regulation FD, targeted at impeding selective disclosure, constrained the use of direct access to senior management. We find a large effect: pre-Reg FD the return premium from school ties was 8.16% per year, while post-Reg FD the return premium is nearly zero and insignificant.

Subjects

Series Statement

  • Working paper / Harvard Business School -- 08-074

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