Are Crowded Crowds Still Wise? Evidence from Financial Analysts' Geographic Diversity

We study the effect of geographically diverse information on sell-side research analysts' individual and consensus forecasts. Using data from satellite images of parking lots of US retailers, we first document that the car counts contain valuable information in aggregate. However, analysts tend to overweight their own forecast in the direction of local car counts relative to other analysts covering the same firm at the same time but in different locations. We find when firms have more geographically concentrated analyst coverage the consensus forecast error is higher, even after controlling for the number of analysts. Analyses using within-firm variation and exogenous shocks in geographic coverage due to brokerage closures suggest this relation is causal.