Analyst Geographic Proximity to Industry Center, Industry Information, and the Efficacy of Analyst Research Output

We propose that an analyst’s distance-to-industry-center (DTIC) can serve as an instrument for industry information. Consistent with this hypothesis, we find that DTIC has a significant negative impact on forecast accuracy. We conduct a series of tests to corroborate the link between DTIC and industry information, which is relevant for within-industry co-movement of firm fundamentals and returns. Finally, we exploit the impact of Chinese import shocks on different industries as exogenous shocks to industry centers to establish a causal link between DTIC and forecast accuracy. Overall, we shed light on how an analyst’s industry information is disseminated into the market.