Having exactly one stock analyst follow a company is more important for its price stability than having ten more join later.
April 1, 2026
Original Paper
The First Analyst Matters: An Extensive-Margin Coverage Threshold in Disagreement Pricing
SSRN · 6507118
The Takeaway
There is a sharp 'extensive-margin' threshold in financial markets where the jump from zero coverage to one single analyst does almost all the work in stabilizing a stock's price. Once that first information intermediary is present, the benefit of adding additional analysts becomes statistically negligible.
From the abstract
The disagreement pricing literature relies on analyst forecast dispersion, leaving disagreement unmeasured for zero-coverage stocks. We address this gap using Machine Forecast Disagreement (MFD)—the dispersion of out-of-sample machine-learning return forecasts—to test for disagreement pricing at the extensive margin of analyst coverage. Using Korean equities (79% uncovered in our sample), we document a sharp threshold: the MFD premium is economically large for uncovered stocks but statistically