Firm Uncertainty and Financial Analysts’ Activity
34 Pages Posted: 7 May 2011
Date Written: October 1, 2010
Using implied volatility surfaces provided by the Optionmetrics database for the period 2003-2007, this study documents the strong, positive relation between investor perceptions of firm uncertainty and financial analysts’ activity. Granger causality tests reveal that an increase in perceived uncertainty leads to a subsequent increase in financial analysts’ activity, but this increase in activity does not seem to lead to lower firm uncertainty perceptions. The results from a sample of merger and acquisition transactions completed by S&P500 firms confirm a positive relation between firm uncertainty perceptions and financial analysts’ subsequent activity.
Keywords: Financial analysts, Uncertainty, Implied volatility
JEL Classification: G14
Suggested Citation: Suggested Citation