This is a past event
The seminar will be held the Edward Wright Annex G04 and Online via MS Teams on March 19th from 3pm - 4:15pm (contact: bs-research@abdn.ac.uk for link).
Join Dr Dong Yan, an Associate Professor of Finance at Rotterdam School of Management, Erasmus University.
Abstract:
This paper provides empirical evidence of information contagion in equity analysts’ stock recommendations. Theory posits that equity analysts inadvertently propagate idiosyncratic information shocks across stocks they cover, as information ambiguity prevents them from perfectly disentangling systematic and idiosyncratic shocks. By combining stock returns, short interest, and analyst recommendations, we construct a measure of idiosyncratic information shocks at the analyst-month level and capture belief updating via recommendation downgrades. Consistent with the predictions, we show that analysts exposed to severe price declines in strongly recommended stocks exhibit a significantly higher likelihood of downgrading other stocks. The contagion intensifies for firms with correlated fundamentals, lower firm-specific information uncertainty, and analysts with greater skills. While sophisticated investors react less to contagion-driven revisions, market reactions drive prices away from fundamentals.
- Speaker
- Dr Dong Yan
- Hosted by
- University of Aberdeen Business School