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Title: Stock price synchronicity and analyst coverage in emerging markets
Authors: Chan, K.
Hameed, A. 
Keywords: Analyst coverage
Information efficiency
International financial markets
Price synchronicity
Issue Date: 2006
Citation: Chan, K., Hameed, A. (2006). Stock price synchronicity and analyst coverage in emerging markets. Journal of Financial Economics 80 (1) : 115-147. ScholarBank@NUS Repository.
Abstract: This paper examines the relation between the stock price synchronicity and analyst activity in emerging markets. Contrary to the conventional wisdom that security analysts specialize in the production of firm-specific information, we find that securities which are covered by more analysts incorporate greater (lesser) market-wide (firm-specific) information. Using the R2 statistics of the market model as a measure of synchronicity of stock price movement, we find that greater analyst coverage increases stock price synchronicity. Furthermore, after controlling for the influence of firm size on the lead-lag relation, we find that the returns of high analyst-following portfolio lead returns of low analyst-following portfolio more than vice versa. We also find that the aggregate change in the earnings forecasts in a high analyst-following portfolio affects the aggregate returns of the portfolio itself as well as those of the low analyst-following portfolio, whereas the aggregate change in the earnings forecasts of the low analyst-following portfolio have no predictive ability. Finally, when the forecast dispersion is high, the effect of analyst coverage on stock price synchronicity is reduced. © 2005 Elsevier B.V. All rights reserved.
Source Title: Journal of Financial Economics
ISSN: 0304405X
DOI: 10.1016/j.schres.2005.09.006
Appears in Collections:Staff Publications

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