Dynamics of analysts' coverage and the firms' information environment

The main goal of this paper is to study analysts' coverage of stocks. Through a series of ordered probit regressions the paper studies the relationship between changes in coverage and the information environment of a firm.Coverage decreases on average with higher errors in estimation. The data also shows that coverage is less likely to decrease for physically large firms, but more likely to decrease for firms with high lagged market value. Higher past revisions to the predictions also decrease coverage, showing a real cost of uncertainty.