Three Essays on the Impact of Analysts on Financial Markets

Farhat, Amel

Three Essays on the Impact of Analysts on Financial Markets

dc.contributor.advisor	David, Alexander
dc.contributor.author	Farhat, Amel
dc.contributor.committeemember	Sezer, Deniz
dc.contributor.committeemember	Lehar, Alfred
dc.contributor.committeemember	Hollifield, Burton
dc.contributor.committeemember	Koskinen, Yrjö‏
dc.date	2019-11
dc.date.accessioned	2019-06-27T13:47:45Z
dc.date.available	2019-06-27T13:47:45Z
dc.date.issued	2019-06-25
dc.description.abstract	This thesis studies three diﬀerent topics on the impact of analysts on ﬁnancial markets. The ﬁrst chapter documents that the price of analysts’ dispersion risk in the cross-section of stock returns changes over time, in particular, turns positive in periods of high analyst dispersion. Our result holds using 100 test portfolios that are double-sorted on their betas and their coeﬃcients on aggregate dispersion, as well as numerous test portfolios. We construct a general equilibrium model in the spirit of Merton’s ICAPM, in which analysts of diﬀerent types have heterogeneous beliefs and provide diﬀerent forecasts of a macroeconomic factor. The consumer does not trust either analyst fully, and dynamically adjusts the weight given to each analyst, given the history of their past forecast performance. In equilibrium, each asset’s risk premium depends on its exposure to three factors: the market portfolio, the macroeconomic factor, and, a ”ﬂight-to-safety” factor. The ﬁrst term increases with dispersion, while the third term declines. The latter decline occurs because consumers shift into assets with lower cash ﬂow betas during periods of high dispersion. The model provides a testable implication that the changing sign of the price of risk is due to the ﬂight-to-safety during periods of high dispersion. We ﬁnd strong support for such a ﬂight to safety in the data. The second chapter questions the view that all analysts are equal and develop the idea that analysts may have diﬀerent strategic behaviour to inﬂuence the market. The main contribution is to provide evidence that the market assigns diﬀerent weights to diﬀerent analysts and to show that more experienced analysts have more signiﬁcant impact on asset prices and trading activity. The third chapter studies the relation between dispersion, short sale constraints, and stock returns. The main contribution is to analyze the high returns of a portfolio formed by unconstrained and low opinion divergence stocks. Such portfolio contains stocks with low total and idiosyncratic risks and low leverage. Three and four factors models, as well as liquidity factors models, cannot account for these high abnormal returns.	en_US
dc.identifier.citation	Farhat, A. (2019). Three Essays on the Impact of Analysts on Financial Markets (Doctoral thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca.	en_US
dc.identifier.doi	http://dx.doi.org/10.11575/PRISM/36665
dc.identifier.uri	http://hdl.handle.net/1880/110535
dc.language.iso	eng	en_US
dc.publisher.faculty	Haskayne School of Business	en_US
dc.publisher.institution	University of Calgary	en
dc.rights	University of Calgary graduate students retain copyright ownership and moral rights for their thesis. You may use this material in any way that is permitted by the Copyright Act or through licensing that has been assigned to the document. For uses that are not allowable under copyright legislation or licensing, you are required to seek permission.	en_US
dc.subject	Analysts on Financial Markets	en_US
dc.subject.classification	Education--Finance	en_US
dc.title	Three Essays on the Impact of Analysts on Financial Markets	en_US
dc.type	doctoral thesis	en_US
thesis.degree.discipline	Haskayne School of Business: Management	en_US
thesis.degree.grantor	University of Calgary	en_US
thesis.degree.name	Doctor of Philosophy (PhD)	en_US
ucalgary.item.requestcopy	true