Charles A. Dice Center Working Paper No. 2013-19
61 Pages Posted: 18 Dec 2013 Last revised: 15 Nov 2016
Date Written: November 2016
Because uncertainty is high in bad times, investors find it harder to assess firm prospects and, hence, should value analyst output more. However, higher uncertainty makes analysts’ tasks harder so it is unclear if analyst output is more valuable in bad times. We find that, in bad times, analyst revisions have a larger stock-price impact, earnings forecast errors per unit of uncertainty fall, reports are more frequent and longer, and the impact of analyst output increases more for harder-to-value firms. These results are consistent with analysts working harder and investors relying more on analysts in bad times.
Keywords: Security Analysts; Stock Recommendations; Earnings Forecasts; Crisis; Recessions; Uncertainty
JEL Classification: G14, G20, G24
Suggested Citation: Suggested Citation
Loh, Roger and Stulz, René M., Is Sell-Side Research More Valuable in Bad Times? (November 2016). Charles A. Dice Center Working Paper No. 2013-19; Fisher College of Business Working Paper No. 2013-03-19. Available at SSRN: https://ssrn.com/abstract=2368329 or http://dx.doi.org/10.2139/ssrn.2368329