Uncovering expected returns: Information in analyst coverage proxies

• 成果类型: Article
• 署名作者: Lee, Charles M. C.; So, Eric C.
• 署名单位: Stanford University; Massachusetts Institute of Technology (MIT)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2017.01.007
• 发表日期: 2017
• 页码: 331-348
• 关键词: Analysts; Expected returns; anomalies; coverage; measurement error; Return predictability

摘要

We show that analyst coverage proxies contain information about expected returns. We decompose analyst coverage into abnormal and expected components using a simple characteristic-based model and show that firms with abnormally high analyst coverage subsequently outperform firms with abnormally low coverage by approximately 80 basis points per month. We also show abnormal coverage rises following exogenous shocks to underpricing and predicts improvements in firms' fundamental performance, suggesting that return predictability stems from analysts more heavily covering underpriced stocks. Our findings highlight the usefulness of analysts' actions in expected return estimations, and a potential inference problem when coverage proxies are used to study information asymmetry and dissemination. (C) 2017 Elsevier B.V. All rights reserved.