Analyst Reputation

Financial analysts are concerned about the reputation they obtain about the quality of their recommendations. Their abilities are not directly observable, but only the recommendations they make public. The assessment of their ability can be conducted comparing their recommendations with the realised value of the security. The financial analyst will not be concerned with the quality of its forecasts directly, but only to the extent that they affect the assessment of their ability. Achieving a reputation for high ability will allow financial analysts to obtain higher remuneration and allow them to be employed by more reputable investment banks. It is for this reason that they will seek to maximise their reputation by issuing recommendations strategically.