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http://ssrn.com/abstract=2050972
 
 

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Analyst Interest as an Early Indicator of Firm Fundamental Changes and Stock Returns


Michael J. Jung


New York University - Leonard N. Stern School of Business

M.H. Franco Wong


INSEAD; University of Toronto - Rotman School of Management

Frank Zhang


Yale School of Management

October 15, 2013


Abstract:     
In this study, we propose that analyst interest — the number of analysts who participate on a firm’s earnings conference call — is an early indicator of a firm’s future fundamentals and capital market activities. We find that changes in analyst interest from the prior quarter are positively associated with future sales growth and earnings surprises. Changes in analyst interest also precede changes in capital market activities such as analyst coverage, institutional ownership, and trading volume. Finally, we find that changes in analyst interest are positively correlated with future stock returns. Cross sectional analyses indicate that the marginal effect of analyst interest is strongest for neglected firms. Overall, our results suggest that analyst interest is a leading indicator of firm fundamentals and offers a one-step-ahead advantage in analyzing stock market dynamics.

Number of Pages in PDF File: 47

Keywords: analyst interest, firm fundamentals, analyst coverage, institutional ownership, trading volume, stock returns

JEL Classification: G11, G12, G14, G31, M41

working papers series


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Date posted: May 5, 2012 ; Last revised: October 16, 2013

Suggested Citation

Jung, Michael J. and Wong, M.H. Franco and Zhang, Frank, Analyst Interest as an Early Indicator of Firm Fundamental Changes and Stock Returns (October 15, 2013). Available at SSRN: http://ssrn.com/abstract=2050972 or http://dx.doi.org/10.2139/ssrn.2050972

Contact Information

Michael J. Jung
New York University - Leonard N. Stern School of Business ( email )
44 West 4th Street
New York, NY NY 10012
United States
212-998-0193 (Phone)

M.H. Franco Wong
INSEAD ( email )
Boulevard de Constance
77305 Fontainebleau
France
+33 (0)1 60 72 92 45 (Phone)
HOME PAGE: http://www.insead.edu/facultyresearch/faculty/profiles/fwong/

University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-0729 (Phone)
HOME PAGE: http://www.rotman.utoronto.ca/facbios/viewFac.asp?facultyID=Franco.Wong
Frank Zhang (Contact Author)
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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