economics Practical Magic

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

Hyeon-Seong KIM, Hyoung Goo Kang, byungsuk Han

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