Does it make any sense? Correlation is positive in this case? AI Overview Learn more Research generally shows a positive correlation between the number of analysts covering a stock and the magnitude of earnings surprises, meaning that stocks with a higher number of analysts following them tend to experience larger positive or negative surprises when compared to those with fewer analysts; this is because increased analyst coverage often leads to more thorough analysis and a more accurate consensus forecast, making any deviations from that forecast more noticeable as a surprise. Key points about this correlation: Increased Scrutiny: With more analysts looking at a company, potential issues or positive developments are more likely to be identified and factored into earnings expectations, leading to larger surprises when actual results deviate significantly from those expectations.
LOL. This makes absolutely no sense. "... increased analyst coverage often leads to more thorough analysis and a more accurate consensus forecast ..." hence any surprises " ... are more likely to be identified and factored into earnings expectations ... " which leads us to believe that there would be no surprises, right? Wrong! Who reasoned this, a five-year-old? I guess, what it really is trying to convey is that in this case the IV should be priced perfectly in line with expectations, because no one is expecting a surprise here. But when the surprise finally does arrive in one of those unlikely cases, the resulting jump will catch everyone with their pants down.