Do Security Analysts Reduce Noise?

Posted: 5 Jun 2009

See all articles by Maria G. Vivero

Maria G. Vivero

The University of Dayton

Emre Unlu

University of Nebraska at Lincoln

Date Written: June 4, 2009


This study investigates the role of security analysts in reducing noise in stock price fluctuations. Using a sample of analyst coverage initiations between 1984 and 2006, the study finds that (1) noise is significantly reduced in the year following the initiation and (2) the extent of the noise reduction is a function of the intensity of analyst coverage during the initiation year. The results suggest that analyst coverage makes stock prices less noisy. Analysts’ noise-reducing ability can have positive consequences for the performance of corporate and portfolio managers who rely on forecasting to make long-term financial decisions.

Keywords: Equity Investments, Fundamental Analysis and Valuation Models, Research Sources

Suggested Citation

Vivero, Maria Gabriela and Unlu, Emre, Do Security Analysts Reduce Noise? (June 4, 2009). Financial Analysts Journal, Vol. 65, No. 3, 2009, Available at SSRN:

Maria Gabriela Vivero (Contact Author)

The University of Dayton ( email )

300 College Park
Dayton, OH 45469
United States
937-229-3458 (Phone)

Emre Unlu

University of Nebraska at Lincoln ( email )

Lincoln, NE 68588
United States

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