Earnings Forecasts Accuracy: International Evidence of the Impact of the Covid-19 Pandemic

Covid-19 has brought an unprecedented climate of uncertainty to markets, industries and firms. The role of analysts is always important, but even more when there is a high degree of uncertainty, as investors demand more information and timely, accurate forecasts from analysts to help them make decisions. The main objective of this paper is to examine how the pandemic affected the forecast accuracy in countries from different geographical regions (Europe, Asia, North and Latin America). In addition, we analyzed to what extent other variables (company, macroeconomic and country variables) affect the prediction error and evaluated whether the pandemic modified this effect. The results show that the forecast error was higher in 2020 compared to 2019 and 2021. We observe that the crisis triggered by the pandemic has a significant impact on the error of analysts' forecasts issued 12 months prior to the year-end. However, this impact is no longer significant for forecasts made 3 months in advance. Other variables also explain the forecast accuracy, notably the sign of companies´ earnings, return on equity or the uncertainty avoidance. Additionally, there are significant differences in the forecast errors among the countries included in the study, but these differences were observed in all three exercises under study. This suggests that the variations across countries cannot be solely attributed to the Covid-19 pandemic.