Surrogate Expertise Indicators of Professional Financial Analysts

By Hunton, James E.; McEwen, Ruth Ann | Journal of Managerial Issues, Fall 2000 | Go to article overview

Surrogate Expertise Indicators of Professional Financial Analysts

Hunton, James E., McEwen, Ruth Ann, Journal of Managerial Issues

The study of professional financial analysts' forecasts of earnings is important since: (1) the markets use these forecasts in making assessments of share price, (2) researchers use these estimates as surrogates for market earnings expectations, and (3) professional financial analysts generally overestimate earnings. The study of analyst expertise can help market participants, researchers and even managers to discount the effects of such overestimates. Further, since expert behavior is deemed to be desirable behavior (Bouwman and Bradley, 1997), identification of experts and their decision-making processes could improve the efficacy of training and education, as well as facilitate the development of expert systems.

The term "expertise" has been the source of much confusion. While it is difficult to define expertise, most researchers would agree that experts are presumed to make high quality decisions. Prior researchers have examined expertise on the basis of individual attributes, experience, knowledge, decision processes, and decision quality, yet a comprehensive model of expertise has proven elusive. It seems as though a parsimonious linear model of expertise might map psychological characteristics and cognitive processes to decision quality as a way to classify expertise and predict outcomes. However, even with such a model, it would be difficult to gather reliable data from experts along all of these dimensions. Hence, we often resort to the use of surrogate indicators of expertise.

The objective of this research is to identify and validate a surrogate measure of expertise for professional financial analysts that can be readily obtained from public sources. Hunton and McEwen (1997) examined experimentally various nonpublic experiential factors (e.g., age, years as financial analysts, years with firm) and cognitive factors (e.g., cognitive search strategy, time initially searching for information, time subsequently reviewing information) that might be used to classify financial analysts as relatively high or low expertise forecasters. Using an external measure of expertise provided by brokerage firm management, the researchers found that the analysts' cognitive search strategy distinguished high from low expertise analysts. They used a sophisticated retinal imaging system to classify the analysts' cognitive strategy. Since this technology is expensive, extremely difficult to obtain and complicated to use, we re-examine Hunton and McEwen's research findings in an attempt to identify and v alidate a parsimonious, publicly available surrogate indicator of expertise for financial analysts.

Using sixty "sell-side" financial analysts and a retinal imaging data collection method (called the Integrated Retinal Imaging System or IRIS), our findings suggest that experiential factors, commonly used as proxies for expertise (Affleck-Graves et al., 1990; Anderson, 1988; Biggs, 1984; Bouwman, 1982; Bouwman et al., 1987), are poor indicators of expertise, while membership on the All-America Research Team appears to be a reliable surrogate that is publicly available. These findings are consistent with Stickel (1992) who provides empirical evidence that membership on the All-America Team and accuracy are positively related. The current study extends Stickel's work by examining the relations between various surrogates for expertise, All-America team membership and accuracy. Unique to the current study is a factor-analytic, logistic approach that classifies accuracy by experiential factors, cognitive factors and membership on the All-America team.

The next section of this paper describes surrogates for analyst expertise that are found in the current literature. Subsequent sections provide the research design and report the results. The final section summarizes and concludes the findings of the study and indicates areas for future research.


It is generally assumed that higher levels of expertise involve more elaborate and complex cognitive processing of informational inputs which results in higher quality outputs (Yates, 1990). …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Cite this article

Cited article

Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Surrogate Expertise Indicators of Professional Financial Analysts


Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25,

    New feature

    It is estimated that 1 in 10 people have dyslexia, and in an effort to make Questia easier to use for those people, we have added a new choice of font to the Reader. That font is called OpenDyslexic, and has been designed to help with some of the symptoms of dyslexia. For more information on this font, please visit

    To use OpenDyslexic, choose it from the Typeface list in Font settings.

    OK, got it!

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search


    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.