Shared analyst coverage: Unifying momentum spillover effects

By Usman Ali, David A. Hirshleifer. Journal of Financial Economics, 2018

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Identifying stock connections by shared analyst coverage, we find that a connected-stock (CS) momentum factor generates a monthly alpha of 1.68% (t = 9.67). In spanning regressions, the alphas of industry, geographic, customer, customer/supplier industry, single- to multi-segment, and technology momentum factors are insignificant/negative after controlling for CS momentum. Similar results hold in cross-sectional regressions and in developed international markets. Sell-side analysts incorporate news about linked stocks sluggishly. These effects are stronger for complex and indirect linkages. These results indicate that previously documented momentum spillover effects represent a unified phenomenon that is captured by shared analyst coverage.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/7a9c0482516d06a8d0c1ec5773c349ac5fd2d3d1