In-Group Bias in Financial Markets

Using gender to identify analyst groups, we examine whether in-group bias affects the behavior of sell-side equity analysts and the information dissemination process. We find that analysts hold more optimistic and less accurate earnings expectations for firms with same-gender CEOs, where in-group bias is stronger among men. Greater exposure to out-of-group individuals weakens in-group bias, and the bias is also weaker among analysts located in U.S. states with greater gender equality. Group definitions based on race/ethnicity and name similarity yield similar results. These findings are robust and unlikely to reflect selective information access or various selection effects. This paper was accepted by Eric So, accounting. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.01467 .