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

Jin, Han, Mazouz, Khelifa ORCID: https://orcid.org/0000-0001-6711-1715, Wu, Yuliang and Xu, Bin 2023. Can star analysts make superior coverage decisions in poor information environment? Journal of Banking and Finance 146 , 106650. 10.1016/j.jbankfin.2022.106650

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Abstract

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
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Publisher:	Elsevier
ISSN:	0378-4266
Date of First Compliant Deposit:	30 August 2022
Date of Acceptance:	21 August 2022
Last Modified:	11 Nov 2024 15:30
URI:	https://orca.cardiff.ac.uk/id/eprint/152193

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