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Rewriting History

This article has apparently been around for some time but I have only just stumbled across it (note to self pay more attention)

Apparently the I/B/E/S database that is maintained by Thompson Reuters is subject to extensive rewrites designed to portray analysts in a much better light.

Comparing two snapshots of the entire I/B/E/S analyst stock recommendations database, taken in 2002 and 2004 but each covering the same time period 1993-2002, we identify nearly twenty thousand changes of an unusual nature: the selective removal of analyst names from historic recommendations (“anonymizations”).

This practice turns out to be pervasive and non-random: Bolder recommendations are more likely to be anonymized, as are recommendations from more senior analysts, Institutional Investor “all-stars,” and those who remain in the industry beyond 2002. Abnormal stock returns following subsequently anonymized buy recommendations are significantly lower (by up to 11.0% p.a.) than those following buy recommendations that remain untouched, suggesting that particularly embarrassing recommendations are most likely to be anonymized.

Analysts whose track records appear brighter due to anonymizations experience more favorable career outcomes over the 2003-2005 period than their track records and abilities would otherwise warrant.

So if your recommendation was a dud you simply removed your name from it and pretended it never happened.  The aim of this cheating seems to be undoubtedly to improve career prospects by removing embarrassing recommendations.

And the financial industry continues to wonder why it has such a bad reputation.

 

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