Analysts' incentives to produce industry-level versus firm-specific information

Research output: Contribution to journalArticlepeer-review

42 Scopus citations

Abstract

Using stock returns around recommendation changes to measure the information produced by analysts, I find that analysts produce more firm-specific than industry-level information. Analysts produce more firm-specific information on stocks with higher idiosyncratic return volatilities. The amount of industry information produced by analysts increases with the absolute value of the stock's industry beta and decreases with the stock's idiosyncratic volatility. Other stocks in the industry also respond to the recommendation change, and the magnitude of the response increases with the absolute value of the industry beta of the recommended stock and that of other stocks in the industry. I also offer results on how investors may use analyst research more effectively and potentially improve their investment performance.

Original languageEnglish
Pages (from-to)757-784
Number of pages28
JournalJournal of Financial and Quantitative Analysis
Volume46
Issue number3
DOIs
StatePublished - Jun 2011

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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