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Analyst Coverage, Information, and BubblesSandro C. AndradeUniversity of Miami - Department of Finance Jiangze BianUniversity of International Business and Economics Timothy R. BurchUniversity of Miami - Department of Finance June 2012 Fourth Singapore International Conference on Finance 2010 Paper Journal of Financial and Quantitative Analysis (JFQA), Forthcoming Abstract: This paper uses the unique setting of the 2007 stock market bubble in China to examine whether information dissemination mitigates bubbles. Using multiple measures of bubble intensity for each stock, we find significantly smaller bubbles in stocks with greater analyst coverage. The abating effect of analyst coverage on bubble intensity is weaker when there is greater disagreement among analysts. This suggests that, in line with resale option theories of bubbles, one channel through which analyst coverage mitigates bubbles is by coordinating investors' beliefs. Consistent with this particular information mechanism, stock turnover is negatively correlated with analyst coverage, and the abating effect of analyst coverage on stock turnover is weaker when there is more disagreement among analysts.
Number of Pages in PDF File: 45 Keywords: bubbles, information, security analysts JEL Classification: G12, G14, G18 Accepted Paper SeriesDate posted: December 14, 2009 ; Last revised: June 28, 2012Suggested CitationContact Information
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