Is Sell-Side Research More Valuable in Bad Times?

Charles A. Dice Center Working Paper No. 2013-19

Fisher College of Business Working Paper No. 2013-03-19

61 Pages Posted: 18 Dec 2013 Last revised: 15 Nov 2016

Roger Loh

Singapore Management University - Lee Kong Chian School of Business

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2016

Abstract

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

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

Roger Loh

Singapore Management University - Lee Kong Chian School of Business ( email )

Lee Kong Chian School of Business
50 Stamford Rd
Singapore, 178899
Singapore

HOME PAGE: http://www.mysmu.edu/faculty/rogerloh/

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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