Analyst coverage and the probability of stock price crash and jump

Mohammed Bouaddi, Omar Farooq and Catalina Hurwitz

Review of Behavioral Finance, 2023, vol. 16, issue 3, 510-532

Abstract: Purpose - The aim of this paper is to document the effect of analyst coverage on theex anteprobability of stock price crash and theex anteprobability stock price jump. Design/methodology/approach - This paper uses the data of non-financial firms from France to test the arguments presented in this paper during the period between 1997 and 2019. The paper also uses flexible quadrants copulas to compute theex anteprobabilities of crashes and jumps. Findings - The results show that the extent of analyst coverage is positively associated with theex anteprobability of crash and negatively associated with theex anteprobability of jump. The results remain qualitatively the same after several sensitivity checks. The results also show that the relationship between the extent of analyst coverage and the probability of cash and the probability of jump holds whenexpostprobability of stock price crash and stock price jump is used. Originality/value - Unlike most of the earlier papers on this topic, this paper uses theex anteprobability of crash and jump. This proxy is better suited than the ones used in the prior literature because it is a forward-looking measure.

Keywords: Analyst coverage; Agency problems; Bias; Jumps; Crashes; G20; G30 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rbfpps:rbf-06-2022-0156

DOI: 10.1108/RBF-06-2022-0156

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