Terrorist Attacks, Analyst Sentiment, and Earnings Forecasts
51 Pages Posted: 13 Dec 2015 Last revised: 13 Jan 2020
Date Written: June 5, 2019
We examine whether exogenous and extremely negative events such as terrorist attacks and mass shootings influence the sentiment and forecasts of sell-side equity analysts. We find that analysts who are local to these attacks issue forecasts that are relatively more pessimistic than the consensus forecast. This effect is stronger when the analyst is closer to the event and located in a low-crime region. Impacted analysts are also relatively more pessimistic around the one- and two-year anniversaries of the attacks. Collectively, these findings indicate that exposure to extreme negative events affects the behavior of information intermediaries and the information dissemination process in financial markets.
Keywords: Analyst sentiment, forecast accuracy, extreme events, terrorist attacks
JEL Classification: G14, G40
Suggested Citation: Suggested Citation