An Index of Skilled Analysts and Stock Market Returns

Yifan Meng, Yongan Xu, Weiping Li and Mo Yang

Emerging Markets Finance and Trade, 2024, vol. 60, issue 13, 3135-3151

Abstract: This study constructs a monthly index of skilled analysts (ISA) regarding the coverage by such analysts and explores their predictive ability on the future excess returns of Chinese A-share market. The empirical results reveal that ISA significantly and positively predicts excess stock market returns, with R2s of 4.39% and 4.13% in- and out-of-sample respectively, which surpasses the predictive ability of most commonly used economic variables. High ISA precedes a higher investor sentiment index (ISI) and lower idiosyncratic volatility (IVOL) at firm level. The conclusion remains valid after controlling for a series of other predictor variables and performing robustness tests.

Date: 2024
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DOI: 10.1080/1540496X.2024.2342526

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