Having exactly one stock analyst follow a company is more important for its price stability than having ten more join later.
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.
The First Analyst Matters: An Extensive-Margin Coverage Threshold in Disagreement Pricing
SSRN · 6507118
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