There is a fun paper out that compares the performance of teams of equity analysts with that of individual analysts. Contrary to “wisdom of crowds” tenets, the individuals beat the teams. Interestingly, however, the market (wrongly) thinks teams are better:
We compare the performance of teams of sell-side analysts with that of individual sell-side analysts. We find that teams forecast earnings less accurately than individuals forecast earnings. Based on team theory, we hypothesize that the relatively poor performance of teams is due to less accountability for team versus individual forecast performance. Consistent with our accountability hypothesis, we show that larger teams forecast less accurately than smaller teams, and that analysts are more likely to get terminated or demoted for their poor individual forecasting performance relative to their poor team forecasting performance. We investigate the market perception of team forecasting performance, and show that stock prices react more strongly to earnings revisions by teams compared to revisions by individuals.