The impact of information intermediaries on stock price synchronicity

This paper invssestigates the extent to which information intermediaries, represented by financial analysts, influence the relative amount of firmspecific and market-level information being impounded into stock prices, as measured by stock price synchronicity. Using a sample of fifteen thousand and one hundred twenty (15,120) stocks from forty (40) countries, we find that stock price synchronicity is positively associated with analysts' forecasting activities, which is consistent with analysts increasing the amount of market level information in prices through intra-industry information transfers. We also find that increased disclosure, represented by the level of frequent reporting, moderates the relationship between analysts' forecasting activity and stock price synchronicity, and facilitates the firm-specific component of future earnings. Together, the results suggest that price-relevant information conveyed by financial analysts' activities is a function of the relative information advantage they have.