The impact of buy-side analyst social network relationships on recommendations, price discovery, and employment outcomes

Abstract

SumZero is an online social networking platform dedicated to the buy-side analyst community. We analyze the role that the social network plays in influencing analysts' investment recommendation quality, price discovery, and employment outcomes. We find robust evidence that analysts' relationships within the social network positively impact both the quantity and perceived quality of evaluations that the analysts' recommendations receive from others in the network. We do not find a significant association between analysts' network positions and the holdings of other funds, nor do we find an association with the subsequent returns of the recommended stocks. However, we do find that analysts' network positions positively influence employment outcomes by increasing the likelihood that analysts change jobs. Our results suggest that social networking technologies have the ability to significantly influence analyst awareness, perceptions, and employment outcomes.