The Impact of Economy-Wide Sentiment on Analysts’ Research Activities

54 Pages Posted: 12 Jan 2013 Last revised: 7 Jul 2017

See all articles by Michael (Minye) Tang

Michael (Minye) Tang

New York University (NYU)

Li Yao

Concordia University, Quebec

Date Written: March 16, 2015


In this paper, we examine how economy-wide sentiment, measured by the University of Michigan’s Consumer Sentiment Index, affects analysts’ research activities. Using a firm-fixed effects design, we find that consumer sentiment, notably the component related to economic fundamentals, is negatively associated with analysts’ forecast frequency, but is positively associated with the precision of analysts’ idiosyncratic information, our proxy for analysts’ engagement in private information discovery. The evidence is more pronounced for firms with larger total assets, higher return on assets, better market performance, lower stock return volatility, and higher institutional ownership. We further document that analyst reports are more informative when consumer sentiment is higher. Taken together, our findings suggest that analysts respond to higher consumer sentiment by allocating more effort to private information discovery, which enhances the informativeness of their reports to investors. Our research reveals the impact of sentiment, a macro-level factor, on analysts’ research activities, and it enriches the knowledge of analysts’ decision processes.

Keywords: Financial analysts, Investor sentiment, Private information discovery

JEL Classification: G14, G24

Suggested Citation

Tang, Michael and Yao, Li, The Impact of Economy-Wide Sentiment on Analysts’ Research Activities (March 16, 2015). Journal of Accounting, Auditing and Finance, Forthcoming. Available at SSRN: or

Michael Tang

New York University (NYU) ( email )

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Li Yao (Contact Author)

Concordia University, Quebec ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1MB

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