Securities Analysts as Frame-Makers

Daniel Buenza
Universidad Pompeu i Fabra, Barcelona
Email: daniel.beunza@upf.edu|

Date: 1 February 2005
Time
: 1:00pm - 2:30pm
Venue
: CARR Seminar Room, H615

Abstract

As Wall Street specialists in valuation, securities analysts offer a privileged opportunity to understand how investors grapple with extreme uncertainty. However, the academic literature on analysts is characterised by a puzzling discrepancy between theory and practice: while the theory provides a highly critical account of analysts, this professional category has survived and expanded for almost a century. In this paper we offer a possible explanation for this puzzle with an examination of the intermediary function performed by analysts. We undertake a grounded theory, qualitative content analysis of the reports on Amazon.com written by Henry Blodget and rival security analysts during 1998-2000, a choice of period that also allows us to examine the effect of analysts in creating the Internet bubble and the related regulatory debate. We find that the controversies among analysts during these years can be characterised as internally consistent networks of associations between categorisations, key metrics and analogies. We refer to these as calculative frames, and document how they structure interpretation, facilitate calculation and promote imitation. The findings suggest that analysts should be regarded as frame makers, specialised intermediaries that help investors attach numerical measures of value to stocks even in situations of extreme uncertainty.

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