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Private Information and Analyst Coverage: Evidence from Firm Survey Data

Yoshiyuki Nakazono, Maiko Koga and Tomohiro Sugo
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Maiko Koga: Bank of Japan

No 18-E-17, Bank of Japan Working Paper Series from Bank of Japan

Abstract: Using a unique panel of survey data on Japanese firms, we provide evidence that firms hold private information revealed in the survey that has predictive power for stock returns. Specifically, we find that the information contained in firms' industry demand forecasts can predict the stock returns of the sector and individual firms up to the next five years. We also uncover the origin of the information advantage of firms, by examining its relation to analyst coverage. To examine the source of the information asymmetry this result implies, we focus on the extent to which firms are covered by securities analysts and find that such information asymmetry arises only in the case of firms not sufficiently covered by analysts.

Keywords: analyst coverage; efficient market hypothesis; return predictability; information advantage; private information; survey data (search for similar items in EconPapers)
JEL-codes: D84 G23 (search for similar items in EconPapers)
Date: 2018-10-19
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