Can star analysts make superior coverage decisions in poor information environment?

Jin, H., Mazouz, K., Wu, Y. and Xu, B. ORCID: https://orcid.org/0000-0003-3512-5834 (2023) Can star analysts make superior coverage decisions in poor information environment? Journal of Banking & Finance, 146. 106650. ISSN 0378-4266 doi: 10.1016/j.jbankfin.2022.106650

Abstract/Summary

This study uses the quality of coverage decisions as a new metric to evaluate the performance of star and non-star analysts. We find that the coverage decisions of star analysts are better predictors of returns than those of non-star analysts. The return predictability of star analysts’ coverage decisions is stronger for informationally opaque stocks. We further exploit the staggered short selling deregulations, Google’s withdrawal, and the anti-corruption campaign as three quasi-natural experiments that create plausibly exogenous variations in the quality of information environment. These experiments show that the predictive power of star analysts’ coverage decisions strengthens (weakens) following a sharp deterioration (improvement) in firms’ information environment, consistent with the notion that star analysts possess superior ability to identify mispriced stocks. Overall, star analysts make better coverage decisions and play a superior role as information intermediaries, especially in poor information environment.

Item Type	Article
URI	https://centaur.reading.ac.uk/id/eprint/122714
Identification Number/DOI	10.1016/j.jbankfin.2022.106650
Refereed	Yes
Divisions	Henley Business School > Finance and Accounting
Publisher	Elsevier
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