ANALYSTS' OPTIMISTIC TONE, STOCK PRICE SYNCHRONIZATION, AND STOCK PRICE CRASH RISK: EMPIRICAL EVIDENCE FROM CHINA

Information of listed companies disclosed by analysts to investors is conducive to increase the pricing efficiency of market. However, pricing efficiency may decrease if analysts write reports with an optimistic tone. To explore the influences of analysts' optimistic tone on pricing efficiency of market, optimistic tone indexes in analyst reports of A-share listed companies in China during 2009-2017 were extracted through text analysis in this study. On the basis of optimistic tone indexes, an empirical test of influences and acting mechanism of analysts' optimistic tone on stock price synchronization and stock price crash risk was carried out. Results demonstrate that analysts' optimistic tone decreases the stock price synchronization of listed companies significantly and intensifies the crash risk. In view of its mechanism, analysts' optimistic tone can decrease stock price synchronization of listed companies significantly when the performance of the company is increasing. However, analysts' optimistic tone drives investors to overreact to good news, thus generating bubbles of stock prices and increasing stock price crash risk. The conclusions obtained in this study disclose not only the internal logic behind analysts' optimistic tone to influence pricing efficiency, but also provide some enlightenment to lower the capital market risk further and increase pricing efficiency.