Is Analyst Output Informative? An Intraday Study of Analyst Comments

50 Pages Posted: 16 Jun 2012 Last revised: 10 Feb 2017

Jason V. Chen

University of Illinois at Chicago

Venky Nagar

University of Michigan, Stephen M. Ross School of Business

Jordan Schoenfeld

University of Utah

Date Written: February 4, 2017

Abstract

Conventional wisdom suggests that the public release of financial analyst output is informative to traders about firm value. However, empirical tests of this mechanism have encountered difficulties in isolating the release of analyst output from concurrent intervening events such as analysts' private-client communications. Earnings conference calls provide a unique opportunity to overcome this obstacle: both analyst remarks and stock price movements can be measured publicly in real time. Accordingly, we find that the linguistic tone of analyst comments during the call is significantly associated with intraday returns after appropriately controlling for management disclosures, explaining about one-third of the stock price movement during the discussion period. In reacting to analyst tone, traders anticipate future analyst predictions and recommendations on the company, which can help to explain why prior studies have found mixed evidence on the price reaction to the release of those products. Overall our findings suggest that traders use the public release of analyst output to determine firm value.

Keywords: Analyst Output, Conference Calls, Corporate Disclosure

JEL Classification: G14, G20, D83

Suggested Citation

Chen, Jason V. and Nagar, Venky and Schoenfeld, Jordan, Is Analyst Output Informative? An Intraday Study of Analyst Comments (February 4, 2017). Ross School of Business Paper No. 1197. Available at SSRN: https://ssrn.com/abstract=2084488 or http://dx.doi.org/10.2139/ssrn.2084488

Jason V. Chen

University of Illinois at Chicago ( email )

1200 W Harrison St
Chicago, IL 60607
United States

Venky Nagar

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-647-3292 (Phone)
734-764-3146 (Fax)

Jordan Schoenfeld (Contact Author)

University of Utah ( email )

1645 E. Campus Center
Salt Lake City, UT 84112
United States

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