Sadka and Scherbina document a close link between mispricing and liquidity by investigating stocks with high analyst disagreement.

• Position: Conferences

Sadka and Scherbina document a close link between mispricing and liquidity by investigating stocks with high analyst disagreement. Previous research finds that these stocks tend to be overpriced, but prices correct downward as uncertainty about earnings is resolved. The authors conjecture that one reason mispricing has persisted is that analyst disagreement coincides with high trading costs. Indeed, they show that in the cross-section the less liquid...