Analysts' Technological Expertise

Using U.S. patent citations, we find that the number of analyst following and earnings forecast accuracy are positively related to a firm’s technological links with other firms in the market. The likelihood of an analyst’s coverage and forecast accuracy increase in the firm’s technological links with other firms the analyst covers. Further analysis shows that the positive effects of technological links are more pronounced for firms with higher information production costs, and are driven by both within- and across-industry technological links. Our results suggest that technological expertise allows analysts to exploit the informational complementarities across firms along the technological links.