Analyst Incentives and Stock Return Synchronicity: Evidence from MiFID II
Journal
Financial Analysts Journal
ISSN
0015-198X
Type
journal article
Date Issued
2022
Author(s)
Abstract (De)
MiFID II affects sell-side analyst incentives in Europe, forcing analysts to justify the value they add. While the number of analysts decreases, the average stock return synchronicity with the market also decreases, implying an improvement in price informativeness. The decrease in synchronicity is larger for firms that are more important for the analysts and brokers covering them. It is also asymmetric and substantially larger for negative market movements. Our results suggest that, by changing incentives, MiFID II not only improves the quality of individual analyst work, but also achieves an improvement in the aggregate stock price informativeness.
Language
English
Refereed
Yes
Publisher
CFA Institute
Subject(s)
Eprints ID
265102