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The rise in the cross-sectoral dispersion of earnings expectations during COVID-19

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  • Joost Bats
  • William Greif
  • Daniel Kapp

Abstract

This paper documents a durable increase in the cross-sectoral dispersion of earnings expectations during the COVID-19 crisis. An empirical analysis shows that the rise in dispersion of earnings forecasts can be explained by the introduction of lockdown measures, which had a particularly adverse impact on the travel sector. Accordingly, in terms of earnings expectations, countries that are relatively independent from the travel sector were least affected by a tightening of lockdowns. At the same time, the start of vaccination campaigns has been a game changer: more stringent lockdown measures added far less to the cross-sectoral dispersion in earnings expectations once vaccines started to be rolled out in late 2020. Going forward, the dispersion in earnings expectations remains elevated, implying that analysts may expect the effects of the crisis to be of a rather structural nature.

Suggested Citation

  • Joost Bats & William Greif & Daniel Kapp, 2021. "The rise in the cross-sectoral dispersion of earnings expectations during COVID-19," Working Papers 724, DNB.
    • Handle: RePEc:dnb:dnbwpp:724
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    More about this item

    Keywords

    COVID-19; Financial markets; Earnings expectations; Cross-sectoral dispersion; Lockdown measures; Vaccinations;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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