Information, Analysts, and Stock Return Comovement
National University of Singapore (NUS) - Department of Finance
National Bureau of Economic Research (NBER); University of Alberta - Department of Finance and Statistical Analysis
UNSW Australia Business School, School of Banking and Finance
Bernard Yin Yeung
National University of Singapore - Business School
July 30, 2015
AFA 2011 Denver Meetings Paper
Analysts follow disproportionally firms whose fundamentals correlate more with those of their industry peers. This coverage pattern supports models of profit-maximizing information intermediaries producing preferentially information valuable in pricing more stocks. We designate highly followed firms whose fundamentals best predict those of peer firms as bellwether firms. When analysts revise a bellwether firm’s earning forecast, it changes the prices of other firms significantly; however, revisions for firms that are less intensely followed do not change the prices of heavily followed firms. Unidirectional information spillovers explain how the more accurately priced stocks might exhibit more comovement.
Number of Pages in PDF File: 54
Keywords: Analysts; Return comovement; Information spillover; Earnings forecasts; Bellwether firms
JEL Classification: G14
Date posted: March 14, 2010 ; Last revised: September 14, 2015
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollobot1 in 0.250 seconds