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Equity Analysts and the Market's Assessment of Risk
Author(s) -
LUI DAPHNE,
MARKOV STANIMIR,
TAMAYO ANE
Publication year - 2012
Publication title -
journal of accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 6.767
H-Index - 141
eISSN - 1475-679X
pISSN - 0021-8456
DOI - 10.1111/j.1475-679x.2012.00462.x
Subject(s) - equity (law) , credit rating , equity risk , business , stock price , financial economics , stock (firearms) , economics , actuarial science , accounting , valuation (finance) , political science , law , mechanical engineering , paleontology , series (stratigraphy) , biology , engineering
The traditional view of equity analysts is that they are a source of new information about future cash flows. We broaden this view by demonstrating that equity analysts are also a substantive source of new information about priced risk. In particular, we document that, when announced, changes in analyst risk ratings distinctly and significantly affect equity returns, and are generally followed by significant changes in Fama–French factor loadings. Also, while less frequent than credit rating changes, equity risk rating changes are timelier, and with a larger overall stock price impact than credit rating changes.