Insight

When noise can help

Do the divergent views given by analysts have an influential effect on stock prices? Researchers find out

When the going gets tough, it is not just investors who are confused about which firm to back — uncertainty affects analysts, who investors depend on more during downturns, as well. This ends up making analyst output jagged and screechy. Roger K Loh and René M Stulz studied analyst reports between 1983 and 2011 and found that analysts tend to churn out divergent views during a crisis. However, despite the divergence, these views tend to have a much more influential effect on stock prices.  

Title: Is Sell-Side Research More Valuable in Bad Times?

Source: The National Bureau of Economic Research

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