PhD seminar with Felix Wilke

Title: The Information Intermediary Role of Professional Fund Analysts: A Textual Analysis Approach

Abstract: This study collects and examines a comprehensive sample of written analyst reports for worldwide equity funds. First, I find that the tone in analyst reports drives fund flows even when the analyst ratings are controlled for. This suggests that written research output guides investors’ capital allocations to active fund managers. Then, I develop a dictionary containing size-related words that is able to capture the extent to which fund analysts discuss fund size. Interestingly, fund size vocabulary features not only more prominently when funds are large in an absolute sense but also if funds operate at inefficient fund sizes, irrespective of being too large or too small. Finally, I estimate a topic model in analyst reports and identify a topic related to fund size and capacity, which equally is more prominent when fund sizes deviate from optimal ones. This indicates that investors can learn from analyst reports to make informed investment decisions.