Wall Street analysts are believed to number among the quintessential numbers crunchers. Financial models they develop based on a company's statements allow them to objectively, rationally and statistically assess its performance and project future earnings based on their model and the economics of the industry.

However, a new study suggests analysts may not be the rigidly calculating individuals that many investors imagine. Instead, they are susceptible to lingual as well as numerical input.

The research indicates that when new CEOs pepper their initial message to shareholders with heavy doses of charismatic language, analysts tend to swallow at least some of it. Consequently, they offer more favorable -- albeit more often inaccurate -- earnings forecasts for the company involved.

This is especially true when there is a heightened uncertainty about the company's future.

"When things are stable, I don't need a charismatic leader to stand up and tell me what the future will be," said Penn State management professor Vilmos Misangyi, co-author of the study. "Clearly, our results suggest that analysts also rely on soft criteria as well as hard criteria. They're looking for uncertainty reduction."

Angelo Fanelli, of the HEC School of Management in Paris, and Henry L. Tosi, of the University of Florida, co-authored the report, "In Charisma We Trust: The Effects of CEO Charismatic Visions on Securities Analysts." It was published in the December issue of Organization Science.

Dr. Misangyi and his colleagues analyzed 367 new CEOs who took office between 1990 and 1999. They looked at the first letter the CEOs sent to shareholders, which was the first opportunity the executives had to lay out an agenda and inspire the troops.

The researchers examined three types of statements in the letters: those that referred to the company's past; those that pertained to the CEO's vision for the future; and those that addressed shareholders, employees and the capabilities of the company.

The typical letter was critical of the past, used moral, ideological and emotional language to describe the CEO's vision of the future, and used empowering language to describe how the vision was going to be achieved.

"Charismatic vision framing is somewhat formulaic," Dr. Misangyi explains.

Then, the researchers disregarded all the sentences that didn't fall into one of the categories and studied those that did, primarily using dictionaries of "charismatic" words -- faith, challenge and inspiration, for example -- that other researchers have used to analyze the content of similar documents.

Finally, they divided the number of charismatic words used by the number of words in the letter to measure the "charismatic" content.

"We're very careful to say that what we've measured here is charismatic language. That doesn't make any claim the CEO is charismatic," Dr. Misangyi cautions.

What he and his fellow researchers discovered was that the more charismatic language the new CEOs used, the more inclined analysts were to issue favorable recommendations.

"It fits with what we want to believe, which is that leaders will be able to deliver us," Dr. Misangyi said.

Moreover, the range of opinions that analysts had about a company narrowed when the CEO's letter had high "charismatic" content.

As a rule, analysts do not like to offer forecasts and recommendations that stray too far from the consensus of their colleagues anyway. But when charismatic language was involved, "the effect we find was above the normal herding that occurs," Dr. Misangyi said.

The researchers also found that charismatic language resulted in less accurate one-year earnings forecasts from the analysts. That's another reason for investors to think twice before making an investment based on an analyst's recommendation.

"Charismatic language engenders among analysts more extreme judgments, both positive and negative," the researchers write.

You would think that if analysts are influenced by the language, they would tend to err on the high side. Dr. Misangyi says one possible reason analysts err on the low side as well may have something to do with the impact charismatic leaders have on people.

"One thing that is true of charismatics is that some people love them and some people hate them," he said.

The researchers also found that the more accurate analysts are in general, the less susceptible they are to a CEO's word play.

"The effect of charismatic language is much stronger on low ability analysts than it is on high ability analysts," Dr. Misangyi said.

He and his colleagues believe that the study may encourage analysts to devote more time on number crunching and less on a CEO's flowery prose.

"Our results imply that CEO charismatic visions may have negative consequences for analysts' judgments and ultimately for their careers," they write.

Not to mention the negative consequences for investors who hang on an analyst's every word.