Determinants of the Informativeness of Analyst Research
Analyst research helps prices reflect information about a security's fundamentals. However, analysts' private incentives potentially contribute to misleading research and it is possible that the market fixates on such misleadi...
| Main Authors: | , , |
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| Language: | en_US |
| Published: |
2002
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| Subjects: | |
| Online Access: | http://hdl.handle.net/1721.1/705 |
| _version_ | 1826213894083837952 |
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| author | Frankel, Richard M. Kothari, S.P. Weber, Joseph |
| author_facet | Frankel, Richard M. Kothari, S.P. Weber, Joseph |
| author_sort | Frankel, Richard M. |
| collection | MIT |
| description | Analyst research helps prices reflect information about a security's fundamentals.
However, analysts' private incentives potentially contribute to misleading research and
it is possible that the market fixates on such misleading and/or optimistic reports. We
examine cross-sectional determinants of the informativeness of analyst reports, i.e.,
their effect on security prices, controlling for endogeneity among the factors affecting
informativeness. Analysts are more informative when the potential brokerage profits
are higher (e.g., high trading volume and high volatility) and when they reveal "bad
news." Analyst informativeness is reduced in circumstances of increased information
processing costs. We fail to find evidence that informativeness of analyst reports is due
to market's fixation or over- or under-reaction to analyst reports.
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| first_indexed | 2024-09-23T15:56:32Z |
| id | mit-1721.1/705 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T15:56:32Z |
| publishDate | 2002 |
| record_format | dspace |
| spelling | mit-1721.1/7052019-04-10T21:56:19Z Determinants of the Informativeness of Analyst Research Frankel, Richard M. Kothari, S.P. Weber, Joseph Analyst Forcast Forecast Analyst Market Effieiency Earnings Forecast Informativeness Analyst research helps prices reflect information about a security's fundamentals. However, analysts' private incentives potentially contribute to misleading research and it is possible that the market fixates on such misleading and/or optimistic reports. We examine cross-sectional determinants of the informativeness of analyst reports, i.e., their effect on security prices, controlling for endogeneity among the factors affecting informativeness. Analysts are more informative when the potential brokerage profits are higher (e.g., high trading volume and high volatility) and when they reveal "bad news." Analyst informativeness is reduced in circumstances of increased information processing costs. We fail to find evidence that informativeness of analyst reports is due to market's fixation or over- or under-reaction to analyst reports. 2002-06-07T19:21:46Z 2002-06-07T19:21:46Z 2002-06-07T19:21:55Z http://hdl.handle.net/1721.1/705 en_US MIT Sloan School of Management Working Paper;4243-02 398895 bytes application/pdf application/pdf |
| spellingShingle | Analyst Forcast Forecast Analyst Market Effieiency Earnings Forecast Informativeness Frankel, Richard M. Kothari, S.P. Weber, Joseph Determinants of the Informativeness of Analyst Research |
| title | Determinants of the Informativeness of Analyst Research |
| title_full | Determinants of the Informativeness of Analyst Research |
| title_fullStr | Determinants of the Informativeness of Analyst Research |
| title_full_unstemmed | Determinants of the Informativeness of Analyst Research |
| title_short | Determinants of the Informativeness of Analyst Research |
| title_sort | determinants of the informativeness of analyst research |
| topic | Analyst Forcast Forecast Analyst Market Effieiency Earnings Forecast Informativeness |
| url | http://hdl.handle.net/1721.1/705 |
| work_keys_str_mv | AT frankelrichardm determinantsoftheinformativenessofanalystresearch AT kotharisp determinantsoftheinformativenessofanalystresearch AT weberjoseph determinantsoftheinformativenessofanalystresearch |