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Pandemic Effect on Analyst Forecast Dispersion: Earnings Uncertainty or Information Lockdown?

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  • Haoyu Gao
  • Huiyu Wen
  • Shujiaming Yu

Abstract

This study examines the COVID-19 pandemic effect on financial analysts’ forecast dispersion. Using public data on Chinese listed companies, we find that the unexpected inter-area mobility restrictions imposed due to COVID-19 significantly increase analysts’ forecast dispersion for firms in pandemic-exposed zones. The mechanism analysis shows that analysts’ site visits and face-to-face communication with target firms dramatically decrease during the COVID-19 pandemic, supporting the information lockdown hypothesis. The study also hypothetically discusses and empirically excludes earnings uncertainty explanations. Our findings add new insights to the emerging literature on the indirect economic costs of COVID-19.

Suggested Citation

  • Haoyu Gao & Huiyu Wen & Shujiaming Yu, 2021. "Pandemic Effect on Analyst Forecast Dispersion: Earnings Uncertainty or Information Lockdown?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(6), pages 1699-1715, May.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:6:p:1699-1715
    DOI: 10.1080/1540496X.2021.1903427
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    Cited by:

    1. Gao, Haoyu & Wen, Huiyu & Yu, Shujiaming, 2022. "Weathering information disruption: Typhoon strikes and analysts’ forecast dispersion," Finance Research Letters, Elsevier, vol. 49(C).
    2. Joost Bats & William Greif & Daniel Kapp, 2021. "The rise in the cross-sectoral dispersion of earnings expectations during COVID-19," Working Papers 724, DNB.
    3. Zhang, Jinjin & Wu, Jinyu & Luo, Yalin & Huang, Ziyan & He, Ruzhen, 2022. "COVID-19 pandemic, limited attention, and analyst forecast dispersion," Finance Research Letters, Elsevier, vol. 50(C).
    4. Gao, Haoyu & Wen, Huiyu & Wang, Xingjian, 2022. "Pandemic effect on corporate financial asset holdings: Precautionary or return-chasing?," Research in International Business and Finance, Elsevier, vol. 62(C).
    5. Bats, Joost & Greif, William & Kapp, Daniel, 2022. "The rise in the cross-sectoral dispersion of earnings expectations during COVID-19," Working Paper Series 2664, European Central Bank.
    6. Gao, Haoyu & Li, Jinxuan & Wen, Huiyu, 2023. "Bank funding costs during the COVID-19 pandemic: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).

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