Firm-specific or market-wide information: How does analyst coverage influence stock price synchronicity?
29 Pages Posted: 17 Jan 2022
Date Written: January 17, 2022
This study shows that analysts generate firm-specific information rather than market-wide information. While previous studies just report the positive relationship between stock price synchronicity and analyst coverage, we newly suggest that the positive relation can be attributed to the interaction between analyst coverage and firm performance cyclicality. After controlling for the interaction effect between the analyst coverage and cyclicality, synchronicity rather decreases with the analyst coverage. Under the high analyst forecast dispersion, both effects lessen, namely, we observe the decreasing effect on synchronicity from increasing analyst coverage and the increasing effect from the interaction between analyst coverage and cyclicality.
Keywords: Analyst coverage; Cyclicality; Firm performance; Firm-specific information; Stock price synchronicity
JEL Classification: G14, G15, G19
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