Does Face-changing Behavior Increase Stock Idiosyncratic Volatility?

Abstract

Abstract:

In stock markets, analysts usually have face-changing behavior, which means analysts' forecasts may change according to the fluctuation of stock prices. In order to study whether analysts' face-changing behaviors can affect the idiosyncratic volatility of stocks in different situations, this paper combines market condition (bull & bear), status of analysts (star & non-star) and nature of stocks (growth & value) to make different sub-samples. Empirical results show that:(1) In bull markets, analysts' face-changing behaviors for price forecast and star analysts' face-changing behaviors for EPS forecast can affect the idiosyncratic volatility significantly both for growth and value stocks; (2) In bear markets, analysts' face-changing behaviors for price forecast and star analysts' face-changing behaviors for EPS forecast have no significant effect on growth stocks. Analysts' face-changing behaviors for price forecast can affect the idiosyncratic volatility of value stocks significantly, but star analysts' face-changing behaviors for EPS forecast cannot have this effect; (3) Non-star analysts' face-changing behaviors for EPS forecast have no significant effect on the idiosyncratic volatility in all sub-samples. This paper contributes to the study of influence factors of idiosyncratic volatility of stocks and to the study of influence of analysts' forecasts.

Key words: analysts' forecast, face-changing behavior, idiosyncratic volatility

Dai Fangzhe, Yin Libo. Does Face-changing Behavior Increase Stock Idiosyncratic Volatility?[J]. , 2017, 29(5): 14-22,130.

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