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Determinants of the relationship between investor sentiment and analysts’ private information production

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  • Walied Keshk
  • Jeff J. Wang

Abstract

We examine whether and how investor sentiment affects analysts’ private information production and the factors that moderate this influence. As expected, analysts’ private information production (measured by the information asymmetry component of analyst forecast dispersion) is significantly negatively associated with investor sentiment. Our tests also show that higher institutional holdings of stock, longer analysts’ earnings forecasting experience, and higher levels of short selling of stock mitigate this negative influence of sentiment on analysts’ private information production. Our findings are informative for researchers, financial analysts, and market participants who rely on analysts’ forecasts to form earnings expectations.

Suggested Citation

  • Walied Keshk & Jeff J. Wang, 2018. "Determinants of the relationship between investor sentiment and analysts’ private information production," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 45(9-10), pages 1082-1099, October.
    • Handle: RePEc:bla:jbfnac:v:45:y:2018:i:9-10:p:1082-1099
    DOI: 10.1111/jbfa.12340
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    Cited by:

    1. Jing, Wei & Zhang, Xueyong, 2021. "Online social networks and corporate investment similarity," Journal of Corporate Finance, Elsevier, vol. 68(C).
    2. Kim, Karam & Ryu, Doojin & Yang, Heejin, 2021. "Information uncertainty, investor sentiment, and analyst reports," International Review of Financial Analysis, Elsevier, vol. 77(C).
    3. Zhang, Xuetong & Zhang, Weiguo, 2023. "Information asymmetry, sentiment interactions, and asset price," The North American Journal of Economics and Finance, Elsevier, vol. 67(C).
    4. Keval Amin & Erica Harris, 2022. "The Effect of Investor Sentiment on Nonprofit Donations," Journal of Business Ethics, Springer, vol. 175(2), pages 427-450, January.
    5. Peter Clarkson & Alexander Nekrasov & Andreas Simon & Irene Tutticci, 2020. "Target price forecasts: The roles of the 52‐week high price and recent investor sentiment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(9-10), pages 1365-1399, October.
    6. Santi, Caterina & Zwinkels, Remco C.J., 2023. "Exploring style herding by mutual funds," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 85(C).

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