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Cross-sectoral dispersion in firms’ earnings expectations during the COVID-19 crisis

Author

Listed:
  • Bats, Joost
  • Greif, William
  • Kapp, Daniel

Abstract

More than a year after the onset of the COVID-19 crisis, euro area stock prices have risen close to all-time highs, mainly driven by a recovery in earnings expectations. However, COVID-19 and the associated lockdowns have left a larger and longer-lasting mark on some companies than on others. Indeed, earnings expectations have become more heterogeneous across sectors, in line with expectations of an uneven recovery. This stands in sharp contrast with the developments during the Global Financial Crisis, when cross-sectoral dispersion first dropped and then normalised.Empirical analysis suggests that cross-sectoral dispersion in 12-month earnings per share forecasts has increased with each tightening of lockdown measures. At the same time, the start of vaccination campaigns has been a game changer: since the vaccine rollout began in late 2020, more stringent lockdown measures have added far less to the dispersion in earnings expectations. JEL Classification: E44, G10, G12

Suggested Citation

  • Bats, Joost & Greif, William & Kapp, Daniel, 2021. "Cross-sectoral dispersion in firms’ earnings expectations during the COVID-19 crisis," Economic Bulletin Boxes, European Central Bank, vol. 5.
    • Handle: RePEc:ecb:ecbbox:2021:0005:2
    Note: 1884807
    as

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    More about this item

    Keywords

    cross-sectoral dispersion; earnings expectations; lockdown measures; vaccinations;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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