The Value of Differing Points of View : Evidence from Financial Analysts' Geographic Diversity

We show that analysts incorporate geographically dispersed information about firms into individual forecasts and that limited analyst geographic diversity adversely affects consensus forecasts and firm liquidity. Using satellite imagery of U.S. retailers' parking lots, we find analysts shade their own forecast in the direction of local car counts relative to other analysts covering the same firm at the same time but from different locations. Examining all industries, we find firms with more geographically concentrated analyst coverage have higher consensus forecast errors and are less liquid. Evidence from shocks in geographic coverage due to brokerage closures suggest these relations are causal