Information footholds: Isolating local presence as a factor in analyst performance and trading

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jimonfin.2009.11.001 Byline: Charles Chang Abstract: I compare the performance of buy/hold/sell recommendations from foreign, local, and expatriate (foreigners with local operations) analysts in an emerging market. Location appears to be important: expatriate analysts significantly outperform foreign analysts. Expatriates also significantly outperform locals, implying that other factors such as global resources also play a role, and a variety of controls for the characteristics of the recommending firm does not alter findings. Trading based on expatriate recommendations generates significantly positive risk-adjusted returns. Furthermore, foreign and local institutional investors appear to trade on the superior information of expatriate analysts, even when it contradicts their own information. Author Affiliation: Cornell University, 435 Statler Hall, Ithaca, NY 14853, USA