Underlying Risk Preferences and Analyst Risk-Taking Behavior

This study investigates the effect of underlying risk preferences on analysts' work-related decisions. Specifically, we examine whether facial width-to-height ratio (fWHR), an innate personal characteristic that has been linked to financial risk tolerance, affects analysts' stock coverage decisions and earnings forecasts. We find that high-fWHR analysts cover firms with lower earnings predictability, and issue bolder forecasts. Our findings shed new light on the black box of analyst decision making, and assist investment practitioners in evaluating the information content produced by different types of analysts and understanding the observed dispersion in analyst forecasts