Security analyst networks, performance and career outcomes

Authors' draft. Final version to be published in The Journal of Finance. Available online at http://onlinelibrary.wiley.com/Using a sample of 42,376 board directors and 10,508 security analysts we construct a social network, mapping the connections between analysts and directors, between directors, and between analysts. We use social capital theory and techniques developed in social network analysis to measure the analyst’s level of connectedness and investigate whether these connections provide any information advantage to the analyst. We find that better-connected (better-networked) analysts make more accurate, timely, and bold forecasts. Moreover, analysts with better network positions are less likely to lose their job, suggesting that these analysts are more valuable to their brokerage houses. We do not find evidence that analyst innate forecasting ability predicts an analyst’s future network position. In contrast, past forecast optimism has a positive association with building a better network of connections

Explaining co-movements between equity and CDS bid-ask spreads

In this paper I show that the co-movements between bid-ask spreads of equities and credit default swaps vary over time and increase over crisis periods. The co-movements are strongly related to systematic risk factors and to the theoretical debt-to-equity hedge ratio. I document that hedging and asymmetric information, besides higher funding costs and market volatility risk, are driving factors of the commonality and are significantly priced in CDS bid-ask spreads