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Information in excess analyst coverage: Evidence from China’s stock market

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  • Yuan Zhang

Abstract

This paper investigates whether excess analyst coverage can transmit information about future stock return and firm performance. We find that excess analyst coverage is positively correlated with future stock return, return on total assets and unexpected earnings of firms. Meanwhile, the abnormal return of the arbitrage strategy based on excess analyst coverage comes from its predictive power on future firm performance. Moreover, if excess analyst coverage is caused by good news, then higher excess coverage indicates that the firm will perform much better than the market’s expectation, and the stock return is also much higher. Our findings offer further evidence on the information delivery role of analysts and help investors construct more effective investment portfolios.  JEL classification numbers: G11, G12, G14

Suggested Citation

  • Yuan Zhang, 2019. "Information in excess analyst coverage: Evidence from China’s stock market," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 9(6), pages 1-12.
    • Handle: RePEc:spt:apfiba:v:9:y:2019:i:6:f:9_6_12
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    References listed on IDEAS

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    More about this item

    Keywords

    Excess analyst coverage; stock return; firm performance; information delivery;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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