Information, Analysts, and Stock Return Comovement

49 Pages Posted: 22 Mar 2010 Last revised: 30 Mar 2010

See all articles by Allaudeen Hameed

Allaudeen Hameed

National University of Singapore (NUS) - Department of Finance

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Jianfeng Shen

UNSW Australia Business School, School of Banking and Finance

Bernard Yin Yeung

National University of Singapore - Business School

Multiple version iconThere are 2 versions of this paper

Date Written: March 2010

Abstract

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.

Suggested Citation

Hameed, Allaudeen and Morck, Randall K. and Shen, Jianfeng and Yeung, Bernard Yin, Information, Analysts, and Stock Return Comovement (March 2010). NBER Working Paper No. w15833. Available at SSRN: https://ssrn.com/abstract=1575378

Allaudeen Hameed (Contact Author)

National University of Singapore (NUS) - Department of Finance ( email )

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HOME PAGE: http://www.bschool.nus.edu.sg/staff_profile/cv.asp?ID=3

Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

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National Bureau of Economic Research (NBER)

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European Corporate Governence Institute ( email )

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Asian Bureau of Finance and Economic Research ( email )

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Jianfeng Shen

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Bernard Yin Yeung

National University of Singapore - Business School ( email )

15 Kent Ridge Drive
BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

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