Information, Analysts, and Stock Return Comovement
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
NUS Business School, National University of Singapore
NBER Working Paper No. w15833
We examine information spillover as a source of stock return synchronicity, where information about highly-followed “prominent” stocks is used to price other “neglected” stocks sharing a common fundamental component. We find that stocks followed by few analysts co-move significantly with firm-specific fluctuations in the prices of highly followed stocks in the same industry, but do not observe the converse. This effect is more prominent in industries where analysts follow fewer stocks. Earnings forecast revisions for highly followed stocks cause price changes in little followed stocks, but the converse is again not observed. This is consistent with information spillover being primarily unidirectional – flowing from prominent to neglect stocks, but not vice versa. These findings also validate models of specialized information intermediaries in stock markets assisting the information capitalization process.
Number of Pages in PDF File: 49working papers series
Date posted: March 22, 2010
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