Using Abnormal Analyst Coverage to Unlock New Evidence on Stock Price Crash Risk
Author | : Hasibul Chowdhury |
Publisher | : |
Total Pages | : 47 |
Release | : 2019 |
ISBN-10 | : OCLC:1304199035 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book Using Abnormal Analyst Coverage to Unlock New Evidence on Stock Price Crash Risk written by Hasibul Chowdhury and published by . This book was released on 2019 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We employ a characteristic-based model to decompose total analyst coverage into abnormal and expected components and show that abnormal coverage contains valuable information about individual firm ex-ante crash risk (proxied by implied volatility smirk from options data). Specifically, one standard deviation increase in unexpected or abnormal coverage is associated with a 5.5% decrease in the ex-ante crash risk. The abnormal coverage signal is more useful in firms with a more transparent information environment, proxied by lower analyst dispersed opinions, lower financial opacity, and more comparable financial statements. Collectively, the results suggest that options market investors utilise abnormal coverage to identify and assess crash risk of mispriced firms.