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Extreme Sentiment and Jumps in Analyst Forecast Dispersion

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  • Li, Pan
  • Chen, Kecai
  • Zhu, Xiaoneng

Abstract

We study the effects of extreme sentiment on analyst forecast dispersion using the COVID-19 pandemic as a natural experiment, building on China's unique experimental environment. Employing manually collected data, we find that unlike common sentiment measured by air quality and investor sentiment, extreme sentiment stemming from the COVID-19 pandemic leads to jumps in analyst forecast dispersion. After controlling for common sentiment, the effect remains. Our study suggests that jumps in analyst forecast dispersion can be explained by extreme sentiment.

Suggested Citation

  • Li, Pan & Chen, Kecai & Zhu, Xiaoneng, 2024. "Extreme Sentiment and Jumps in Analyst Forecast Dispersion," Finance Research Letters, Elsevier, vol. 62(PA).
    • Handle: RePEc:eee:finlet:v:62:y:2024:i:pa:s1544612324001430
    DOI: 10.1016/j.frl.2024.105113
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    References listed on IDEAS

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    More about this item

    Keywords

    Extreme sentiment; Analyst forecast dispersion; Jumps; COVID-19 pandemic;
    All these keywords.

    JEL classification:

    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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