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Information, Analysts, and Stock Return Co-movementAllaudeen HameedNational University of Singapore (NUS) - Department of Finance Randall MorckUniversity of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER) Jianfeng ShenThe University of New South Wales - School of Banking and Finance, Australian School of Business Bernard Yin YeungNUS Business School, National University of Singapore June 25, 2012 AFA 2011 Denver Meetings Paper Abstract: 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: G14 working papers seriesDate posted: March 14, 2010 ; Last revised: January 30, 2013Suggested CitationContact Information
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