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Shared Analyst Coverage: Unifying Momentum Spillover Effects

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  • Usman Ali
  • David Hirshleifer

Abstract

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.

Suggested Citation

  • Usman Ali & David Hirshleifer, 2018. "Shared Analyst Coverage: Unifying Momentum Spillover Effects," NBER Working Papers 25201, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:25201
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    More about this item

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G4 - Financial Economics - - Behavioral Finance

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