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)
UNSW Australia Business School, School of Banking and Finance
Bernard Yin Yeung
National University of Singapore - Business School
December 2, 2013
AFA 2011 Denver Meetings Paper
We provide evidence of information spillover emanating from industry bellwether firms. Specifically, when analysts revise the earnings forecasts of bellwether firms, which are heavily followed by sell-side analysts and whose fundamentals are better predictors of many other firms’ fundamentals, we observe significant changes in the prices of other related firms which are thinly covered or uncovered by analysts. These information spillovers are unidirectional; earnings forecast revisions for less intensely followed firms do not affect the prices of heavily followed firms. We show that such spillovers form an important source of stock return co-movement, consistent with recent models of information intermediaries.
Number of Pages in PDF File: 44
Keywords: Analysts; Return co-movement; Information spillover; earnings forecasts; bellwether firms
JEL Classification: G14working papers series
Date posted: March 14, 2010 ; Last revised: December 10, 2013
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