Information, Analysts, and Stock Return Co-movement
National University of Singapore (NUS) - Department of Finance
University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER)
The University of New South Wales - School of Banking and Finance, Australian School of Business
Bernard Yin Yeung
National University of Singapore - Business School
June 25, 2012
AFA 2011 Denver Meetings Paper
Consistent with recent theoretical models of information intermediaries, we find that more analysts follow stocks whose fundamentals are better predictors of many other firms’ fundamentals. We provide evidence that information spillover from high analyst coverage firms to other fundamentally related firms is an important source of return co-movement. Specifically, when analysts revise the earnings forecast of bellwether firms, we observe significant changes in the prices of other fundamentally related firms which are thinly covered, both within and outside of the bellwether firms’ industry. These information spillovers are unidirectional; earnings forecast revisions for less intensely followed firms do not affect the prices of heavily followed firms.
Number of Pages in PDF File: 60
Keywords: Analysts, Return co-movement, Information spillover, earnings forecasts, bellwether firms
JEL Classification: G14working papers series
Date posted: March 14, 2010 ; Last revised: January 30, 2013
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