NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Is Sell-Side Research More Valuable in Bad Times?

Roger K. Loh, René M. Stulz

NBER Working Paper No. 19778
Issued in January 2014
NBER Program(s):   AP   CF

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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This paper was revised on November 16, 2016

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Document Object Identifier (DOI): 10.3386/w19778

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