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

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.

KEYWORDS:

• COVID-19 pandemic
• analyst forecast dispersion
• information lockdown
• earnings uncertainty

JEL:

• D83
• G14
• G17

Acknowledgments

We thank the Editors, two anonymous reviewers, and the participants in EMFT Research on Pandemics Symposium in January 2021 for their helpful comments. All errors are our own.

Declaration Of Interest

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest.

Additional information

Funding

This work is supported by the Fundamental Research Funds for the Central Universities and the Research Funds of Renmin University of China [21XNA010].