Commonality in disagreement

We examine the relationship between firms' individual disagreement and the aggregate disagreement. We find that a commonality in firms' individual disagreements exists at the market level, industry level, and geographic level. This commonality increases with a firm's asymmetric information, uncertainty, and the degree of coverage, but decreases with a firm's accounting information quality. We show that disagreement commonality can be a new measure of firmspecific information centering on analysts. We find a positive relationship between firms' commonality in disagreement and co-movement in their stock returns. A higher disagreement commonality may indicate lower usefulness of firm-specific information that strengthens the synchronicity between a firm's stock return and the market return. Our measure of disagreement commonality is especially useful among inefficient markets where analysts are heavily relied on by investors, such as Asia Pacific markets.

Automated summary

The study reveals the commonality in firms' individual disagreements on market, industry, and geographic levels, which correlates with firm's asymmetric information, uncertainty, and coverage. It also suggests that disagreement commonality can serve as a measure of firm-specific information importance, showing a positive relationship with co-movement in stock returns among firms.