Do Security Analysts Reduce Noise?

SchutteMaria,; UnluEmre,

doi:10.2469/faj.v65.n3.7

Cited by 30 publications

(11 citation statements)

References 43 publications

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“…Stocks followed by more analysts commove more in the US (Piotroski and Roulstone 2004) and elsewhere (Chan and Hameed 2006); and changes in their fundamentals also correlate more closely with changes in the fundamentals of more other firms (Hameed, Morck, and Yeung 2005). All these findings are consistent with Veldcamp 2006; as is evidence that analysts' forecasts contain mainly industry and economy-level information (Schutte and Unlu 2009;Crawfordet al 2012). 2 Presumably, firm-specific information enters stock prices via other channels.…”

Section: Private Information-based Arbitragesupporting

confidence: 74%

R-squared and the Economy

Mørck

Yeung

2013

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Randall Morck gratefully acknowledged partial funding from the SSHRC and Bank of Canada. Eileen Wang and Lu Zhang provided superb research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Section: Private Information-based Arbitragesupporting

confidence: 74%

R-squared and the Economy

Mørck

Yeung

2013

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“…Schutte and Unlu proved that analysts coverage helps investors gauge the information content of companyspecific news and reduce the proportion of noise-motivated trades, they results confirm traditional views of the role of analyst research as an instrument for investors to better understand the informational content of company-specific news [24]. It means that analysts coverage improve stock price informativeness and reduce information asymmetry.…”

Section: B Stock Price Informativeness and Information Asymmetrymentioning

confidence: 57%

Stock Price Informativeness and Investment-Cash Flow Sensitivity

Yang

2010

2010 International Conference of Information Science and Management Engineering

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Durnev, Morck and Yeung(2004a) show that more informative stock prices facilitate more efficient corporate investment. I first show how stock prices informativeness affect firm's investment-cash flow sensitivity. Using China's listed companies from manufacturing industry between 2001 and 2008, I find strong negative relations between stock prices informativeness and investment-cash flow sensitivity, the investment-cash flow sensitivity decreases significantly with increasing stock price informativeness. The empirical results also strongly support the point that more informative stock price facilitate more efficient capital allocation. Keywords-stock price informativeness; investment-cash flow sensitivity; efficiency of capital allocation; asymmetric information I.2010 International Conference of Information Science and Management Engineering 978-0-7695-4132-7/10 $26.00

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“…Healy and Palepu (2001) find that analysts act as information intermediaries and are involved in production of private information which helps detect any mismanagement by a firm's manager. Also, Schutte and Unlu (2009) suggest that the noise associated with stock price fluctuations is reduced, when analyst coverage is higher. Yu (2008) finds that firms with higher analyst coverage have lesser earnings management, suggesting that analysts process private information which the management of a firm may not release.…”

Section: Interpreting the Resultsmentioning

confidence: 99%

Factors Mitigating Firm-specific Information Asymmetry and Target Price Accuracy in India

Sayed

Sreeram

2017

Vikalpa: The Journal for Decision Makers

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Executive Summary Over the last decade, efforts have been made to improve the quality of financial reporting and corporate governance standards prevailing in emerging markets. Even after 20 years of globalization, emerging markets continue to trade as a separate class ( Bekaert & Harvey, 2014 ). On account of a weak regulatory environment, firm-specific information asymmetry is expected to be on the higher side as compared to developed markets. In such an environment, any factors which mitigate information asymmetry may help improve efficiency of information providers such as equity research analysts. The role of equity research analysts is to process financial information and provide estimates which may be used by investors to make informed investment decisions. This study investigates whether the factors which mitigate firm-specific information asymmetry improve analyst target price accuracy in India. We expect sophisticated financial intermediaries such as equity research analysts to produce more accurate target price forecasts for firms with higher frequency of corporate announcements, higher analyst coverage, and higher foreign institutional holdings. Past research suggests that these three factors reduce information asymmetry and this reduction could possibly help analysts produce superior results. Our results show that higher frequency of corporate announcements creates short-term noise which reduces target price accuracy at the end of one-year forecast horizon. Our findings reveal that higher analyst coverage leads to better flow of firm-specific private information and improves target price accuracy anytime during or at the end of one year. We report that higher foreign institutional holding possibly improves stock liquidity, attracting more traders, which eventually leads to better target price accuracy at the end of forecast horizon. Our key finding is that there is a reduction in firm-specific information asymmetry due to the presence of more number of analysts and higher percentage of institutional holding.

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Do Security Analysts Reduce Noise?

Cited by 30 publications

References 43 publications

R-squared and the Economy

R-squared and the Economy

Stock Price Informativeness and Investment-Cash Flow Sensitivity

Factors Mitigating Firm-specific Information Asymmetry and Target Price Accuracy in India

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