Analyst Disagreement and Aggregate Volatility Risk

43 Pages Posted: 17 Jul 2009 Last revised: 29 Sep 2015

See all articles by Alexander Barinov

Alexander Barinov

University of California Riverside

Date Written: August 1, 2012


The paper explains why firms with high dispersion of analyst forecasts earn low future returns. These firms beat the CAPM in periods of increasing aggregate volatility and thereby provide a hedge against aggregate volatility risk. The aggregate volatility risk factor can explain the abnormal return differential between high and low disagreement firms. This return differential is higher for firms with abundant real options, and this fact can be explained by aggregate volatility risk. Aggregate volatility risk can also explain why the link between analyst disagreement and future returns is stronger for firms with high short-sale constraints.

Keywords: Aggregate volatility risk, analyst disagreement, analyst forecasts, real options, mispricing

JEL Classification: G12, G13, G32, E44, D80, M41

Suggested Citation

Barinov, Alexander, Analyst Disagreement and Aggregate Volatility Risk (August 1, 2012). Journal of Financial and Quantitative Analysis (JFQA), Vol. 48, No. 6, 2013. Available at SSRN: or

Alexander Barinov (Contact Author)

University of California Riverside ( email )

900 University Ave.
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Riverside, CA 92521
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585-698-7726 (Phone)


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