Predictability of Analysts’ Forecast Revision under COVID-19: Evidence from Emerging Markets

ABSTRACT

Using stock market data from six emerging economies (that is, China, Brazil, India, Malaysia, the Philippines, and Russia), we find that analysts’ forecast revision, a significant anomaly in emerging markets during the past two decades, is disappeared during the COVID-19 pandemic. We formulate factor sorted portfolio and Fama–MacBeth regression to explain the disappearance. We find that the return predictability of analysts’ forecast revision is negatively correlated with the pandemic’s severity, whereas analysts have not provided sufficient information to investors under this severe pandemic. We supplement the theory of time-varying risk premium as well as sophisticated investors with fresh evidence.

KEYWORDS:

• Analysts’ forecast revision
• COVID-19
• cross-sectional stock returns
• emerging markets

JEL:

• G11
• G12

Acknowledgments

We thank Dr. Susan Sunila Sharma (Co-Editor), the subject editor and two anonymous reviewers for their helpful comments. Li acknowledges the Fundamental Research Funds for the Beijing Universities (Grant Number: GNTD202004).

Supplementary material

Supplemental data for this article can be accessed on the publisher’s website.

Notes

1. We report the raw return of the portfolio in Table A2 in appendix.

Additional information

Funding

This work was supported by the Fundamental Research Funds for the Beijing Universities [QNTD202004].