TY - JOUR
T1 - Analysts' incentives to produce industry-level versus firm-specific information
AU - Liu, Mark H.
PY - 2011/6
Y1 - 2011/6
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=80053081585&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=80053081585&partnerID=8YFLogxK
U2 - 10.1017/S0022109011000056
DO - 10.1017/S0022109011000056
M3 - Article
AN - SCOPUS:80053081585
SN - 0022-1090
VL - 46
SP - 757
EP - 784
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
IS - 3
ER -