Terrorist Attacks, Analyst Sentiment, and Earnings Forecasts

48 Pages Posted: 13 Dec 2015 Last revised: 26 Apr 2018

See all articles by Constantinos Antoniou

Constantinos Antoniou

University of Warwick - Warwick Business School

Alok Kumar

University of Miami - School of Business Administration

Anastasios Maligkris

University of Miami - School of Business Administration

Date Written: April 5, 2018

Abstract

This study examines whether sell-side equity analysts located near major terrorist attacks and mass shootings issue more pessimistic earnings forecasts. Using multiple measures of forecast pessimism, we find that analysts who are local to these events issue forecasts that are more pessimistic than the consensus forecast. This effect is stronger when the analyst is closer to the event, and when the analyst is located in a low-crime region. We also find a similar but weaker effect around the one-year anniversaries of extreme events. The earnings forecasts of affected analysts are more accurate, since pessimism induced by extreme negative events partially mitigates the well-documented optimism bias among analysts. Overall, our results suggest that the mood and forecasts of sell-side equity analysts are influenced by exogenous and extreme negative events.

Keywords: Analyst sentiment, forecast bias, forecast accuracy, extreme events.

JEL Classification: G14, G24

Suggested Citation

Antoniou, Constantinos and Kumar, Alok and Maligkris, Anastasios, Terrorist Attacks, Analyst Sentiment, and Earnings Forecasts (April 5, 2018). Available at SSRN: https://ssrn.com/abstract=2702051 or http://dx.doi.org/10.2139/ssrn.2702051

Constantinos Antoniou

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

Alok Kumar

University of Miami - School of Business Administration ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124-6552
United States
305-284-1882 (Phone)

HOME PAGE: http://moya.bus.miami.edu/~akumar

Anastasios Maligkris (Contact Author)

University of Miami - School of Business Administration ( email )

514 Jenkins Building
Department of Finance
Coral Gables, FL 33124
United States

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