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Busy analysts in uncertain times

Author

Listed:
  • Kim, Sehee
  • Lee, Woo-Jong
  • Park, Sunyoung
  • Sunwoo, Hee-Yeon

Abstract

We assess the disturbing impact of economic policy uncertainty on forecasting activities of sell-side analysts. Based on analysts’ earnings forecasts for Korean listed companies for 2001–2019, we document that each analyst issues more earnings forecasts and covers more firms and industries in uncertain periods. More importantly, we find that the heightened workload per analyst is positively associated with forecast errors during the uncertain periods. We extend prior studies by providing a labor-centric explanation of lower forecast quality in uncertain times.

Suggested Citation

  • Kim, Sehee & Lee, Woo-Jong & Park, Sunyoung & Sunwoo, Hee-Yeon, 2022. "Busy analysts in uncertain times," Finance Research Letters, Elsevier, vol. 46(PB).
    • Handle: RePEc:eee:finlet:v:46:y:2022:i:pb:s1544612321004645
    DOI: 10.1016/j.frl.2021.102488
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    References listed on IDEAS

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    1. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
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    3. Roger K. Loh & René M. Stulz, 2018. "Is Sell‐Side Research More Valuable in Bad Times?," Journal of Finance, American Finance Association, vol. 73(3), pages 959-1013, June.
    4. Dan Amiram & Wayne R. Landsman & Edward L. Owens & Stephen R. Stubben, 2018. "How are analysts’ forecasts affected by high uncertainty?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 45(3-4), pages 295-318, March.
    5. Nagar, Venky & Schoenfeld, Jordan & Wellman, Laura, 2019. "The effect of economic policy uncertainty on investor information asymmetry and management disclosures," Journal of Accounting and Economics, Elsevier, vol. 67(1), pages 36-57.
    6. Frankel, Richard & Kothari, S.P. & Weber, Joseph, 2006. "Determinants of the informativeness of analyst research," Journal of Accounting and Economics, Elsevier, vol. 41(1-2), pages 29-54, April.
    7. Clement, Michael B., 1999. "Analyst forecast accuracy: Do ability, resources, and portfolio complexity matter?," Journal of Accounting and Economics, Elsevier, vol. 27(3), pages 285-303, July.
    8. X. Frank Zhang, 2006. "Information Uncertainty and Analyst Forecast Behavior," Contemporary Accounting Research, John Wiley & Sons, vol. 23(2), pages 565-590, June.
    9. Harrison Hong & Jeffrey D. Kubik, 2003. "Analyzing the Analysts: Career Concerns and Biased Earnings Forecasts," Journal of Finance, American Finance Association, vol. 58(1), pages 313-351, February.
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    Cited by:

    1. Karmaziene, Egle, 2023. "The greater the volume, the greater the analyst," Finance Research Letters, Elsevier, vol. 51(C).
    2. Le, Thanh Dat & Trinh, Tri, 2022. "Distracted analysts and earnings management," Finance Research Letters, Elsevier, vol. 49(C).
    3. Hou, Yunfei & Hu, Changsheng, 2023. "Understanding the role of aggregate analyst attention in resolving stock market uncertainty," Finance Research Letters, Elsevier, vol. 57(C).

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