Analyst Coverage and Stock Returns

Huai-Chun Lo^1, and Febri Rahadi¹

¹College of Management, Yuan Ze University, Taoyuan, Taiwan

Cite this paper:
Huai-Chun Lo and Febri Rahadi. Analyst Coverage and Stock Returns. Journal of Business and Management Sciences. 2017; 5(2):42-56. doi: 10.12691/jbms-5-2-3

Abstract

This study investigates the association between risk-adjusted returns and analyst coverage. We find that stocks with better risk-adjusted returns attract more analysts to provide research reports for investors. By following companies with better risk-adjusted returns, an analyst may be able to save time and effort in collecting and processing information. The empirical results indicate that earnings forecasts are more accurate for firms with better risk-adjusted stock returns. Moreover, we found that an analyst is more likely to pay more attention for stocks with better risk-adjusted returns and revise earnings forecasts more frequently for them. The results suggest that risk-adjusted returns of stocks have impacts on analysts’ performance.

Keywords:
risk-adjusted returns analyst performance analyst coverage forecast accuracy revision Rrequency

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