Is sell-side research more valuable in bad times?

Is sell-side research more valuable in bad times?

Because uncertainty is high in bad times, investors find it harder to assess firm prospects and, hence, should value analyst output more. However, higher uncertainty makes analysts’ tasks harder so it is unclear if analyst output is more valuable in bad times. We find that, in bad times, analyst rev...

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Bibliographic Details
Main Authors: LOH, Roger, STULZ, René M.
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2018
Subjects:
Security Analysts
Stock Recommendations
Earnings Forecasts
Crisis
Recessions
Uncertainty
Finance and Financial Management
Portfolio and Security Analysis
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/5143
https://ink.library.smu.edu.sg/context/lkcsb_research/article/6142/viewcontent/SSRN_id2368329_newPrePublicationVersion2.pdf
https://ink.library.smu.edu.sg/context/lkcsb_research/article/6142/filename/0/type/additional/viewcontent/Internet_Appendix_LohStulz_Mar2017.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:Because uncertainty is high in bad times, investors find it harder to assess firm prospects and, hence, should value analyst output more. However, higher uncertainty makes analysts’ tasks harder so it is unclear if analyst output is more valuable in bad times. We find that, in bad times, analyst revisions have a larger stock-price impact, earnings forecast errors per unit of uncertainty fall, reports are more frequent and longer, and the impact of analyst output increases more for harder-to-value firms. These results are consistent with analysts working harder and investors relying more on analysts in bad times.

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