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Author: Darren T. Roulstone
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper investigates the relation between analyst characteristics (number of analysts following a firm and their forecast dispersion) and market liquidity characteristics (bid-ask spreads and depths and the adverse-selection component of the spread). Prior research has found contradictory results on the relation between analyst following and market liquidity and has offered differing theories on how analysts affect liquidity. While prior research has posited analysts as proxies for privately informed trade or as signals of information asymmetry, I hypothesize that analysts provide public information, implying that analyst following (forecast dispersion) should have a positive (negative) association with liquidity. Cross-sectional simultaneous estimations provide support for this hypothesis. The results are both statistically significant and economically important. Granger-causality tests indicate that analyst characteristics lead market liquidity characteristics. These results clarify the role of analysts in providing information to financial markets and highlight benefits of increased analyst following.
Author: Darren T. Roulstone
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper investigates the relation between analyst characteristics (number of analysts following a firm and their forecast dispersion) and market liquidity characteristics (bid-ask spreads and depths and the adverse-selection component of the spread). Prior research has found contradictory results on the relation between analyst following and market liquidity and has offered differing theories on how analysts affect liquidity. While prior research has posited analysts as proxies for privately informed trade or as signals of information asymmetry, I hypothesize that analysts provide public information, implying that analyst following (forecast dispersion) should have a positive (negative) association with liquidity. Cross-sectional simultaneous estimations provide support for this hypothesis. The results are both statistically significant and economically important. Granger-causality tests indicate that analyst characteristics lead market liquidity characteristics. These results clarify the role of analysts in providing information to financial markets and highlight benefits of increased analyst following.
Author: David B. Farber
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Book Description
We study the relation between audit committee accounting expertise, analyst following, and market liquidity. Our main results indicate that analyst following increases subsequent to the appointment of an accounting expert to the audit committee. We also provide evidence that accrual quality, as opposed to audit quality or management earnings forecasts, is the channel through which accounting expertise increases analyst following and improves analyst forecast properties. We also show that audit committee accounting expertise is related to higher trading volume and lower liquidity risk, supporting incentives for greater analyst following. Our study extends prior literature by providing evidence that audit committee accounting expertise enhances firms' information environment beyond the effects it has on financial reporting quality or analysts' forecast properties. Our study also complements the literature on determinants of analyst following and market liquidity, both of which are related to cost of capital. Results from our study should be useful to firms seeking to enhance analyst following and market liquidity.
Author: Stefan Sundgren
Publisher:
ISBN:
Category :
Languages : en
Pages : 46
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Book Description
Disclosures in notes have been criticized by practitioners for being unwieldy and contributing little to the quality of the financial information. This study presents evidence on the association between disclosure quality, analyst following and liquidity in the real estate sector. More specifically, we study the disclosure of the methods and significant assumptions applied in determining fair values of investment properties under IAS 40 and IFRS 13. We find that disclosure quality is significantly higher under IFRS 13. Furthermore, we show that the quality is associated with analyst following and bid-ask spreads. However, the improved disclosures following the adoption of IFRS 13 are not associated with any significant positive economic consequences. This result indicates that the revised disclosure requirements in IFRS 13 did not solve any market imperfections.
Author: Cheng-Few Lee
Publisher: Elsevier
ISBN: 0080543979
Category : Social Science
Languages : en
Pages : 345
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Book Description
This research annual publication intends to bring together investment analysis and portfolio theory and their implementation to portfolio management. It seeks theoretical and empirical research manuscripts with high quality in the area of investment and portfolio analysis. The contents will consist of original research on: The principles of portfolio management of equities and fixed-income securities. The evaluation of portfolios (or mutual funds) of common stocks, bonds, international assets, and options. The dynamic process of portfolio management. Strategies of international investments and portfolio management. The applications of useful and important analytical techniques such as mathematics, econometrics, statistics, and computers in the field of investment and portfolio management. Theoretical research related to options and futures. In addition, it also contains articles that present and examine new and important accounting, financial, and economic data for managing and evaluating portfolios of risky assets.
Author: Jayant R. Kale
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
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Book Description
Theory predicts that since a firm with market power has more stable cash flows because of its ability to set prices in the product market, its stock price is less sensitive to order flow (Peress, 2010), which results in greater stock liquidity. We test this prediction on a large sample of firms and find that stock liquidity increases with market power because market power reduces return volatility. Further, consistent with theoretical predictions, the impact of market power on liquidity is more pronounced when information asymmetry is more severe, that is, for smaller firms and for firms with less analyst coverage. Our findings are robust to different measures of liquidity, market power, volatility, and alternative econometric model specifications.
Author: Christoph G. Rösch
Publisher:
ISBN: 9783844012378
Category :
Languages : en
Pages : 198
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Book Description
Author: Vivian W. Fang
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
This paper investigates the relation between stock liquidity and firm performance. The study documents that firms with liquid stocks have better performance as measured by the firm market-to-book ratio. This result is robust to the inclusion of industry or firm fixed effects, a control for idiosyncratic risk, a control for endogenous liquidity using two stage least squares, and the use of alternative measures of liquidity. To identify the causal effect of liquidity on firm performance, we study an exogenous shock to liquidity -- the decimalization of stock trading -- and document that the increase in liquidity around decimalization improves firm performance. The causes of liquidity's beneficial effect are investigated: Liquidity increases the information content of market prices and of performance sensitive managerial compensation. Finally, momentum trading, analyst coverage, investor overreaction, and the effect of liquidity on discount rates or expected returns do not appear to drive the results.
Author: Ji-Chai Lin
Publisher:
ISBN:
Category :
Languages : en
Pages : 62
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Book Description
We examine aggregate analyst forecast errors (AAFE) and find a systematic component, which is predictable using lagged stock market returns and macroeconomic variables. The evidence suggests that analysts do not fully take into account macroeconomic influences on individual firms' earnings in their forecasts, and that systematic biases in market expectations exist. Since informed investors may exploit over-optimistic (over-pessimistic) analyst earnings forecasts in their sells (buys), their trading affects stock prices, which induces uninformed investors to gradually revise their expectations and leave (enter) the market. As the number of uninformed investors decreases (increases), stock market liquidity deteriorates (improves). Based on this reasoning, we show that - predictable AAFE is a driving force of time-varying stock market liquidity - and also an important channel through which stock market liquidity incorporates macroeconomic information.
Author: Christine Ann Botosan
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 220
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Book Description
Author: François-Serge Lhabitant
Publisher: John Wiley & Sons
ISBN: 0470181699
Category : Business & Economics
Languages : en
Pages : 502
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Book Description
Brings together today's best financial minds across the world to discuss the issue of liquidity in today's markets. It is often proxied by trade-based measures (such as trading volume, frequency of trading, dollar value of shares trade, etc), order based measures and price impact measures.
