How Do Analysts Gather Information About the Firms They Follow?

We examine how analysts gather information based on their public interactions with firm managers. We use measures of textual similarity to capture the uniqueness of an individual analyst’s question(s) on a firm’s quarterly earnings conference call relative to 1) the questions of other analysts on the same call, 2) the same analyst on prior firm calls, and 3) the management-prepared narrative. We first examine the associations between the uniqueness of analysts’ questions and analysts’ characteristics. We observe that the uniqueness of individual analysts’ questions varies systematically with analysts’ experience, broker size, forecast frequency, and number of firms followed. Next, we examine how differences across analysts’ questions impact analysts’ revisions and accuracy, and the market’s reaction to the conference call, focusing on the sign of the quarterly earnings surprise. Overall, we provide evidence on analysts’ information gathering to help form their forecasts and how the market interprets differences across analysts’ public interactions with firm managers