Equity Analysts and the Market’s Assessment of Risk
ESSEC Business School
University of Texas at Dallas - Naveen Jindal School of Management
London School of Economics & Political Science (LSE)
May 10, 2012
Journal of Accounting Research, Forthcoming
The traditional view of equity analysts is that they are a source of new information about future cash flows. We broaden this view by demonstrating that equity analysts are also a substantive source of new information about priced risk. In particular, we document that when announced changes in analyst risk ratings distinctly and significantly affect equity returns, and are generally followed by significant changes in Fama-French factor loadings. Also, while less frequent than credit rating changes, equity risk rating changes are timelier, and with a larger overall stock price impact than credit rating changes.
Number of Pages in PDF File: 42
Keywords: equity analysts, investment risk, risk ratings, factor loadings, credit ratings
JEL Classification: G14, G14, G29, M40Accepted Paper Series
Date posted: May 10, 2012 ; Last revised: May 22, 2012
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