Study On The Impact Of The Variation Of Analysts' Earnings Forecast Report And Stock Return

Financial analysts form a special group in the capital market.Their main responsibility is to collect and analyze the operating and financial data of publicly listed companies.On the basis of their analysis,financial analysts predict those companies' performance prospects and make judgments on their investment value to provide for investors for the investment decision-making.Sell-side analysts work at securities firms as information providers and their analyst reports of public companies are open and widely disseminated among investors.Therefore,financial analysts play an important role as information processors and disseminators in the capital market.Studying financial analysts has important value in understanding the capital market efficiency,enterprise valuation,cost of capital,and other associated fields.Previous research not much on the market and industry level.Meanwhile,there are only a few studies on analyst coverage which are related to the number change of analyst reports.Due to the lack of research on the effects of changes in number of analyst reports on stock returns,this study investigates the relationship between changes in the number of analyst reports and future stock returns at the market,industry,and individual stock level.This study attempts to design a more intuitive empirical model to explore(1)the relationship between the number change of analysts' reports and future stock returns at the market,industry,and individual stock level;(2)the relationship between the number change of analysts' reports and future stock returns when the number change in positive or negative.This study selects the data of China's A-shares from May 2005 to October 2016,calculates the total number of analysts' reports in each industry from year to year based on the overall market and the industry division criteria of China Securities Association in 2012,and constructs a comprehensive basic analyst coverage indicators,providing a new perspective for theoretical and empirical research on analysts' following behavior.My findings are as follows.Firstly,at the market,industry,and individual stock level,the number change analysts' reports and future stock returns are negatively correlated;that is to say,the higher the proportion of changes in analysts' reports,the lower the future stock returns.Secondly,the negative relationship is stronger among the following six industries in the industry classification standard of the SFC: agriculture,forestry,animal husbandry,fishery,mining,electricity,heat,gas and water production and supply,construction,information transmission,software and information technology services,scientific research and technology services.Finally,this significant and negative relationship exists mainly when the number of analysts' reports increases rather than decreases.