Analyst Site Visits, Limited Investor Attention and Lead-Lag Effect in China

45 Pages Posted: 21 Sep 2022

See all articles by Zhengyu Cao

Zhengyu Cao

University of International Business and Economics

Rundong Wang

University of International Business and Economics

Xinrong Xiao

University of International Business and Economics

Chengxi (Adam) Yin

University of International Business and Economics

Abstract

Due to limited attention, investors may react sluggishly to complex and implicit information, such as shocks transferred across fundamental linkages. We explore how efficiently China' s stock market incorporates fundamental linkage information into stock prices. Using shared analyst coverage as a proxy for fundamental linkage, we find a significant lead-lag effect among fundamentally connected stocks at weekly frequency, but not at the monthly frequency. Furthermore, we find that analyst site visits alleviate limited investor attention by reminding investors of stocks' correlation in fundamentals, weakening the lead-lag effects. We provide evidence that during their site visit to a firm, analysts can obtain information related to other connected firms, and such information improves analysts' forecast accuracy for these connected firms. The market also reacts more strongly to such analysts' forecast revisions.

Keywords: Limited Attention, Lead-lag Effect, Shared Analyst Coverage, Analyst Site Visits

Suggested Citation

Cao, Zhengyu and Wang, Rundong and Xiao, Xinrong and Yin, Chengxi, Analyst Site Visits, Limited Investor Attention and Lead-Lag Effect in China. Available at SSRN: https://ssrn.com/abstract=4225758

Zhengyu Cao

University of International Business and Economics ( email )

10 Huixindongjie, Chaoyang District
Beijing, 100029
China

Rundong Wang

University of International Business and Economics ( email )

10 Huixindongjie, Chaoyang District
Beijing, 100029
China

Xinrong Xiao

University of International Business and Economics ( email )

10 Huixindongjie, Chaoyang District
Beijing, 100029
China

Chengxi Yin (Contact Author)

University of International Business and Economics ( email )

Beijing
China

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