Analyst Incentives and Stock Return Synchronicity: Evidence from MiFID II

Yihan Li, Xin Liu, Vesa Pursiainen

Research output: Contribution to journalArticlepeer-review

1 Citation (SciVal)


MiFID II affects sell-side analyst incentives in Europe, forcing analysts to justify the value they add. While the number of analysts decreases, the average stock return synchronicity with the market also decreases, implying an improvement in price informativeness. The decrease in synchronicity is larger for firms that are more important for the analysts and brokers covering them. It is also asymmetric and substantially larger for negative market movements. Our results suggest that, by changing incentives, MiFID II not only improves the quality of individual analyst work, but also achieves an improvement in the aggregate stock price informativeness.

Original languageEnglish
Pages (from-to)77-97
JournalFinancial Analysts Journal
Issue number4
Early online date17 Aug 2022
Publication statusPublished - 31 Dec 2022

Bibliographical note

Funding Information:
We appreciate the helpful comments from Simone Giansante, Shiyang Huang, Tse-Chun Lin, Anna Obizhaeva, Pietro Perotti, Hanwen Sun, Chi-Yang Tsou, Ru Xie, as well as seminar participants at the University of Hong Kong and conference participants at IRMC 2020, SFM 2020, ESWM 2020, HARC 2021, SWFA 2021, SES virtual conference 2021, EEA 2021, CMES 2021, CIRF 2021, AFFI 2021, ERIC 2021 PhD Consortium, and Bath PhD conference 2020. We are grateful to Nasdaq Nordic Foundation for funding support. Vesa Pursiainen is grateful for the financial support from the University of Hong Kong Faculty of Business and Economics. This research was partly done during his time at the University of Hong Kong. All errors are ours.


  • MiFID II
  • price informativeness
  • sell-side analysts
  • stock return synchronicity

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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