Stock Volatility, Institutional Ownership and Analyst Coverage

Abstract

We examine the relation between stock volatility and asymmetric information empirically. We use two proxies of information asymmetry: institutional ownership and analyst coverage. We find that firms covered by more analysts are more likely to have less volatile returns. A significant and positive bilateral relationship between stock volatility and institutional block holdings is observed supporting possible herding behaviours of institutional investors.

Keywords: institutional investors, stock volatility, asymmetric information, analyst coverage

JEL Classification: G14, G11, G32