Journal of Finance and Accounting
ISSN (Print): 2333-8849 ISSN (Online): 2333-8857 Website: http://www.sciepub.com/journal/jfa Editor-in-chief: Apply for this position
Open Access
Journal Browser
Go
Journal of Finance and Accounting. 2021, 9(1), 32-40
DOI: 10.12691/jfa-9-1-3
Open AccessArticle

Securities Analyst Attention and Idiosyncratic Volatility Effect: Empirical Research on China Stock Market

Yingcai Huang1,

1School of Securities and Futures, Southwestern University of Finance and Economics, Chengdu, China

Pub. Date: August 06, 2021

Cite this paper:
Yingcai Huang. Securities Analyst Attention and Idiosyncratic Volatility Effect: Empirical Research on China Stock Market. Journal of Finance and Accounting. 2021; 9(1):32-40. doi: 10.12691/jfa-9-1-3

Abstract

In the A-share market, which is dominated by retail investors, most investors lack financial market expertise. Securities analysts’ attention to listed companies has become a reference for investors’ transactions. Based on the data of non-financial listed companies in Shanghai and Shenzhen A-share markets from 1997 to 2020, this paper empirically studies the influence of analyst attention on the idiosyncratic volatility effect by means of portfolio analysis and Fama-Macbeth regression analysis. The results show that: Firstly, A-share market has a significant idiosyncratic volatility effect, and it still exists after adding company, market, annual and industry variables; Secondly, Analyst attention will significantly reduce the idiosyncratic volatility effect, and it still exists significantly after adding company, market, annual, and industry control variables; the research conclusions provide practical guidance for explaining the idiosyncratic volatility effect and the forecast of analyst attention.

Keywords:
analyst attention Idiosyncratic volatility stock return Idiosyncratic volatility effect

Creative CommonsThis work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

References:

[1]  Miller E M. Risk, Uncertainty, and Divergence of Opinion [J]. The Journal of Finance, 1977, 32(4): 1151-1168.
 
[2]  Xu N H, Jiang X Y, Yi Z H. Analysts' Conflict of Interest, Optimism Bias and the Risk of Stock Price Collapse [J]. Economic Research Journal, 2012(07): 128-141.
 
[3]  Xiong W, Chen L N, Ke Z Y. An Empirical Study on the Correlation Between Stock Market Idiosyncratic Risks and Stock Returns [J]. Journal of Industrial Engineering and Engineering Management, 2017(2): 170-176.
 
[4]  Ang A, Hodrick R J, Xing Y, et al. The Cross-Section of Volatility and Expected Returns[J]. The Journal of Finance, 2006, 61(1): 259-299.
 
[5]  Ang A, Hodrick R J, Xing Y, et al. High Idiosyncratic Volatility and Low Returns: International and Further U.S. Evidence [J]. Journal of Financial Economics, 2009, 91(1): 1-23.
 
[6]  Yang H W, Hang L Y. Research on Idiosyncratic Volatility and Cross-sectional Returns of China's Stock Market [J]. Journal of Beijing University of Aeronautics and Astronautics (Social Sciences Edition), 2009(01): 6-10.
 
[7]  Xu X J. Corporate Characteristic Risk and Stock Returns: A Study on Speculation in China’s Stock Market [J]. Economic Management, 2010, 000(012): 127-136.
 
[8]  Zuo H M, Zheng M, Zhang Y. Stock Idiosyncratic Volatility and Cross-sectional Returns: An Explanation of the “Idiosyncratic Volatility Puzzle” [J]. The Journal of World Economy, 2011, 000(005): 117-135.
 
[9]  Liu W Q, Xing W H, Zhang D X. Investment Preferences and “The Mystery of Idiosyncratic Volatility” --- A-shares in Chinese Stock Market [J]. Chinese Journal of Management Science, 2014, 22(008): 10-20.
 
[10]  Barberis N, Huang M. Stocks as Lotteries: The Implications of Probability Weighting for Security Prices[J]. American Economic Review, 2008, 98(5): 2066-2100.
 
[11]  Jiang G J, Xu D, Yao T. The Information Content of Idiosyncratic Volatility[J]. Journal of Financial and Quantitative Analysis, 2009, 44(1): 1-28.
 
[12]  Huang W, Liu Q, Rhee S G, et al. Return Reversals, Idiosyncratic Risk, and Expected Returns[J]. Review of Financial Studies, 2010, 23(1): 147-168.
 
[13]  Yang Y X, Li Y Y. “The Mystery of Idiosyncratic Volatility” in China's Stock Market and the Quantitative Analysis of Its Causes [J]. Review of Investment Studies, 2018, 037(008): 130-143.
 
[14]  Fu M, Liu Q L, Li Y. Heterogeneous Beliefs, Financial Statement Quality and Idiosyncratic Volatility --- Research Based on Difference-in- difference Model [J]. Review of Investment Studies, 2015, 034(009): 146-159.
 
[15]  Tan M, Liu B. CEO's Managerial Power, Board Committee Memberships and Idiosyncratic Volatility[J]. International Review of Financial Analysis, 2016, 48: 21-30.
 
[16]  Dai F Z, Yin L B. Will the “Face-changing” Behavior of Securities Analysts Increase the Volatility of Stock Idiosyncratic? [J]. Management Review, 2017, 29(005):14-22.
 
[17]  Wu D H, Xue Z Y. Investment Value of Financial Analysts’ Earnings Forecasts: Evidence from the Shenzhen-Shanghai A-share market [J]. Accounting Research, 2005, 000(008): 37-43.
 
[18]  Wang Z, Zhang Z, Liu L. Does the Analyst's Suggestion Have Investment Value-empirical Data from the Chinese Market [J]. Research on Financial and Economic Issues, 2006(07): 36-44.
 
[19]  Hu W J, Hang L R. Are Analysts Concerned About Reducing the Accounting Information Risk of Listed Companies? --- Empirical Evidence from China's A-share Listed Companies [J]. Management Review, 2020, v.32(04): 221-232.
 
[20]  Dai F Z, Yin L B. Will the “Face-changing” Behavior of Securities Analysts Increase the Volatility of Stock Idiosyncratic? [J]. Management Review, 2017, 29(005): 14-22.
 
[21]  Wang Z S, Yao Q. Analyst Attention and Stock Yield: Empirical Research Based on Data from China's A-Share Market [J]. Research on Financial and Economic Issues, 2008, 000(004): 56-61.
 
[22]  Pan Y, Dai Y Y, Liu S C. Do Chinese Underwriters Use Analyst Reports to Support the Market? [J]. Economic Research Journal, 2011(3): 131-144.
 
[23]  Wu C P, Zheng F B, Yang S J. Are the Earnings Forecasts and Stock Ratings of Securities Analysts Independent? [J]. China Economic Quarterly, 2013, 12(002): 935-958.
 
[24]  You J X, Qiu S Y, Liu C. Research on the “Face-changing” Behavior of Securities Analysts Forecasting --- Game Model and Empirical Test Based on Analyst Reputation [J]. Journal of Management Sciences in China, 2013, 016(006): 67-84.
 
[25]  Zhou H R, Wang Y X. Are There Differences in Investor Response to Analyst Research Reports? --- Research Based on High-frequency Data [J]. Securities Market Herald, 2017, 000(003):56-64.