DP16200 ICO Analysts

Author(s): Andreas Barth, Valerie Laturnus, Sasan Mansouri, Alexander F Wagner
Publication Date: May 2021
Keyword(s): Analysts, Asymmetric information, Fintech, Initial Coin Offering (ICO)
JEL(s): D82, D83, G14, G24, L26
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16200

Initial Coin Offerings (ICOs) provide a clean opportunity and rich data to study the contribution of analysts to the functioning of capital markets. The assessments of freelancing ICO analysts vary in quality and exhibit biases due to the reciprocal interactions of analysts with ICO team members. Ratings predict ICO success, but imperfectly. Even favorably rated ICOs tend to fail when a greater portion of their ratings reciprocate prior ratings. Failure despite strong ratings is also frequent when analysts have a history of optimism, and when reviews strike a particularly positive tone. These findings suggest that information about the track record of analysts and their potentially conflicting activities is valuable to investors.