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Speed and Expertise in Stock Picking: Older, Slower, and Wiser?

We document significant differences among sell-side security analysts in how frequently they change their minds in making stock recommendations and find that this characteristic strongly predicts their recommendations’ value. Analysts who revise their decisions more slowly make more influential recommendations and generate better portfolio returns than those who do not. We find that slower-revising analysts issue more timely recommendation changes and are less likely to herd on the consensus. Their decision speed-style is associated with positive career outcomes; they are more likely to attain the All-star status and have career longevity. Further, we find a strong tendency for analysts to change their recommendations more slowly throughout their career. While analysts’ decision-speed style and their career tenure correlate, the former is the only characteristic that robustly predicts their recommendations’ value. We link our findings to the role that reputation and experience play in individual decision making and support the notion that a deliberate, slower-decision style trumps a “beat the crowd” mentality.