Analyst coverage network and stock return comovement in emerging markets |
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| Institution: | 1. Department of Business Administration, National Taipei University, Taiwan;2. College of Management, Yuan-Ze University, Taiwan;3. Department of Marketing and Distribution Management, Hsing Wu University. Taiwan;1. Southwestern University of Finance and Economics, PR China;2. Shanghai International Studies University, PR China;3. Stockholm School of Economics, Sweden;1. Cornell S.C. Johnson College of Business, Cornell University, USA;2. Judge Business School, Cambridge University, UK;1. School of Accountancy, University of Nebraska-Lincoln, Lincoln, NE 68588 USA;2. Lally School of Management, Rensselaer Polytechnic Institute, Troy, NY 12180, USA;3. Kogod School of Business, American University, Washington, DC 20016, USA\n |
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| Abstract: | This paper shows that analyst coverage networks (ACN) play an important role in explaining stock return commonalities across Latin American stocks. First, pairs of stocks connected by analysts exhibit higher comovement and excess comovement. Second, firms easily traded by foreign investors are more strongly affected by common coverage. Third, international analysts are an important source of across-country excess comovement. Finally, by creating the network at the brokerage house level and exploiting exogenous changes in ACN around the MSCI LATAM Index reviews, this study addresses endogeneity concerns related to the effect of ACN on commonalities. |
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