Firm-specific or market-wide information: How does analyst coverage influence stock price synchronicity?

29 Pages Posted: 17 Jan 2022

See all articles by Yongsik Kim

Yongsik Kim

Hankuk University of Foreign Studies - Department of International Finance

Doojin Ryu

Sungkyunkwan University

Date Written: January 17, 2022

Abstract

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

Suggested Citation

Kim, Yongsik and Ryu, Doojin, Firm-specific or market-wide information: How does analyst coverage influence stock price synchronicity? (January 17, 2022). Available at SSRN: https://ssrn.com/abstract=4010314 or http://dx.doi.org/10.2139/ssrn.4010314

Yongsik Kim

Hankuk University of Foreign Studies - Department of International Finance ( email )

81, Oedae-ro, Choein-gu
Yongin-si
Kyunggi-do, 17035
Korea, Republic of (South Korea)

Doojin Ryu (Contact Author)

Sungkyunkwan University ( email )

53 Myeongnyun-dong 3-ga Jongno-ju
Guro-gu
Seoul, 110-745
Korea, Republic of (South Korea)

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