Journal of Financial and Quantitative Analysis

Research Articles

Analyst Disagreement and Aggregate Volatility Risk

Alexander Barinov, Terry College of Business, University of Georgia, 438 Brooks Hall, Athens, GA 30602.


The paper explains why firms with high dispersion of analyst forecasts earn low future returns. These firms beat the capital asset pricing model in periods of increasing aggregate volatility and thereby provide a hedge against aggregate volatility risk. The aggregate volatility risk factor can explain the abnormal return differential between high- and low-disagreement firms. This return differential is higher for firms with abundant real options, and this fact can be explained by aggregate volatility risk. Aggregate volatility risk can also explain why the link between analyst disagreement and future returns is stronger for firms with high short-sale constraints.


  I thank Henk Berkman (the referee), Stephen Brown (the editor), and participants of the 2010 Mid-Atlantic Research Conference, the 2012 Financial Intermediation Research Society Conference, the 2010 Northern Financial Association Meetings, the 2010 Financial Management Association Meetings, the 2010 Southern Financial Association Meetings, and the 2010 Eastern Finance Association Meetings, as well as seminar participants at the University of Georgia for their comments and suggestions. All remaining errors are mine.