Context, not predictions: a field study of financial analysts

The purpose of this paper is to shed light on the nature of the work that financial analysts actually do in the context of the market for information and to further open up research in this area to qualitative and sociological inquiry.

A field study with 49 financial analysts (both buy-side and sell-side) was undertaken in order to understand the work that they actually do. This field study was theoretically informed by the sociology of Pierre Bourdieu.

The authors find, in contrast to both conventional wisdom and assumptions in prior (mostly quantitative) literature, that the primary value of sell-side analyst work lies not in the recommendations that analysts ultimately produce, but in the rich contextual information that they provide to buy-side analysts. In order to successfully provide this information, analysts have to embody large amounts of technical capital into their habitus.

Much research in this area erroneously presumes that forecasting is the primary function of analysts. Analyst work needs to be understood as multifarious and requiring a well-developed habitus that is attuned to the accumulation of both technical and social capital. Future qualitative research might usefully explore in more detail the way in which corporate managers interact with analysts. The present study solicits the viewpoints only of the analysts themselves. The organisational context of the analysts was not explored in detail and the interviews were pre-crisis, which possibly explains why the technical capital of sell-side analysts was extolled by interviewees rather than lambasted.

The paper is one of few studies to look at analysts from a qualitative and sociological perspective. It both complements and extends both emerging sociological work on financial intermediaries and qualitative work on the “market for information”.