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Idiosyncratic volatility effect and analyst recommendations

Riya Singla et al.

Review of Quantitative Finance and Accounting2026https://doi.org/10.1007/s11156-026-01493-xarticle
AJG 3ABDC B
Weight
0.50

What the paper says

The present study examines the contribution of the analysts to the Idiosyncratic Volatility (IVOL) effect. It finds that the negative IVOL effect is more prominent in the stocks covered by the analysts than in the non-covered stocks, as the high IVOL stocks attract favorable recommendations. The simultaneous impact of consensus recommendations and IVOL on the subsequent returns is negative. Furthermore, the favorable recommendations for high IVOL stocks are prominently visible when the firm size is small. Institutional ownership and market sentiment do not significantly impact the analysts' recommendations for high IVOL stocks. The analyst recommendations continue to be optimistically biased towards IVOL stocks over a period of time. Thus, it can be inferred that the favorable analyst recommendations contribute toward negative IVOL spread. The findings draw attention to the inefficient information dissemination by the analysts. The favorable recommendations can be explained by a mix of behavioral biases and incentive structures.

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https://doi.org/https://doi.org/10.1007/s11156-026-01493-x

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@article{riya2026,
  title        = {{Idiosyncratic volatility effect and analyst recommendations}},
  author       = {Riya Singla et al.},
  journal      = {Review of Quantitative Finance and Accounting},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1007/s11156-026-01493-x},
}

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.