They Talk but What do they Listen to? Analyzing Financial Analysts' Information Processing using Latent Dirichlet Allocation

In this study, we examine stock analyst information processing behaviour on the example of information transfer between analyst conference calls and analyst reports. From a theoretical perspective, the study contributes to an understanding of analysts’ recommendation biases resulting from their information processing. It provides new insights on how information is actually used by analysts, while practical implications for both sides of conference calls and other market participants are examined. Results indicate that analysts are exposed to new information during conference call events, which they conse-quently incorporate in their reporting.