We show that the personal traits of analysts, as revealed by their political donations, influence their forecasting behavior and stock prices. Analysts who contribute primarily to the Republican Party adopt a more conservative fore- casting style. Their earnings forecast revisions are less likely to deviate from the forecasts of other analysts and are less likely to be bold. Their stock recommen- dations also contain more modest upgrades and downgrades. Overall, these analysts produce better quality research, which is recognized and rewarded by their employers, institutional investors, and the media. Stock market participants, how- ever, do not fully recognize their superior ability as the market reaction following revisions by these analysts is weaker.

We examine how sell-side equity analysts strategically disclose information of differing quality to the public versus the buy-side mutual fund managers to whom they are connected. We consider cases in which analysts recommend that the public buys a stock, but some fund managers sell it. We measure favor trading using mutual fund managers’ votes for analysts in a Chinese “star analyst” competition. We find that managers are more likely to vote for analysts who exhibit more “say-buy/whisper-sell” behavior with these managers. This suggests that analysts introduce noise in their public recommendations, making the more-precise information provided to their private clients more valuable. Analysts’ say-buy/whisper-sell behavior results in information asymmetry: the positive-recommendation stocks bought by the managers who vote for the analysts outperform the stocks sold by these managers after the recommendation dates. Our findings help explain several puzzles regarding analysts’ public recommendations.