Information, analysts, and stock return comovement

Allaudeen Hameed, Randall Morck, Jianfeng Shen () and Bernard Yeung

No 15833, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine information spillover as a source of stock return synchronicity, where information about highly-followed "prominent" stocks is used to price other "neglected" stocks sharing a common fundamental component. We find that stocks followed by few analysts co-move significantly with firm-specific fluctuations in the prices of highly followed stocks in the same industry, but do not observe the converse. This effect is more prominent in industries where analysts follow fewer stocks. Earnings forecast revisions for highly followed stocks cause price changes in little followed stocks, but the converse is again not observed. This is consistent with information spillover being primarily unidirectional - flowing from prominent to neglect stocks, but not vice versa. These findings also validate models of specialized information intermediaries in stock markets assisting the information capitalization process.

JEL-codes: D82 G0 G14 M41 (search for similar items in EconPapers)
Date: 2010-03
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published as Allaudeen Hameed & Randall Morck & Jianfeng Shen & Bernard Yeung, 2015. "Information, Analysts, and Stock Return Comovement," Review of Financial Studies, vol 28(11), pages 3153-3187.

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Journal Article: Information, Analysts, and Stock Return Comovement (2015)
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