Shared analyst coverage: Unifying momentum spillover effects

Abstract

Identifying firm connections by shared analyst coverage, we find that a connected-firm (CF) momentum factor generates a monthly alpha of 1.68% (t = 9.67). In spanning regressions, the alphas of industry, geographic, customer, customer/supplier industry, single- to multi-segment, and technology momentum factors are insignificant/negative after controlling for CF momentum. Similar results hold in cross-sectional regressions and in developed international markets. Sell-side analysts incorporate news about linked firms sluggishly. These effects are stronger for complex and indirect linkages. Consistent with limited investor attention, these results indicate that momentum spillover effects are a unified phenomenon that is captured by shared analyst coverage.