Analyst Contrarianism

ABSTRACT We examine a specific form of what we term analyst contrarianism. We define contrarianism as cases where an analyst expresses a summary opinion contrary to the direction of a given earnings surprise or revision. Distinct from analyst optimism or boldness, we document that analysts interpret negative (positive) earnings news in a positive (negative) light in approximately 11–15 percent of reports. We conjecture that some analysts look for opportunities to make a contrarian stock call for their clients in order to gain visibility, recognition, and career advancement. Our empirical evidence, which is supported by analyst interviews and content analysis of analyst reports, shows that: (1) analysts at non-top-tier brokerage houses are more likely to make a contrarian call, (2) analyst reports that contain contrarian opinions are associated with greater market reactions, and (3) contrarian analysts are more likely to exhibit career advancement. JEL Classifications: G41; M41.