The Impact of Seasonal Affective Disorder on Financial Analysts

Posted: 16 Oct 2017

See all articles by Kin Lo

Kin Lo

University of British Columbia (UBC) - Sauder School of Business

Serena Wu

Queen's University

Date Written: September 5, 2017

Abstract

We examine the impact of Seasonal Affective Disorder (SAD) on financial analysts. We hypothesize and find that analysts are more pessimistic, less precise, and more asymmetric in their boldness in the fall, as indicated by their forecasts of quarterly earnings. The effects are apparent in all forecast horizons analyzed and robust across multiple specifications. Importantly, pessimism in fall forecast revisions show analyst-specific persistence, providing a strong indication that the effect is a result of SAD rather than other coincident factors. We also find evidence of a reversal in pessimism in the spring. Additional analyses show that analyst forecasts exhibit less seasonality than equity returns, and that the presence of analyst forecasts in the fall is associated with attenuation in the seasonal pattern in stock returns. Overall, the evidence suggests that SAD affects both financial analysts and equity investors, but the effect on the latter is stronger.

Keywords: Seasonal Affective Disorder, Analyst Forecasts, Market Efficiency

JEL Classification: G11, G12, G14, G41, M41

Suggested Citation

Lo, Kin and Wu, Serena, The Impact of Seasonal Affective Disorder on Financial Analysts (September 5, 2017). The Accounting Review, Vol. 93, No. 4, Forthcoming . Available at SSRN: https://ssrn.com/abstract=3053274

Kin Lo (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8430 (Phone)
604-822-9470 (Fax)

HOME PAGE: http://www.sauder.ubc.ca/Faculty/People/Faculty_Members/Lo_Kin

Serena Wu

Queen's University ( email )

Kingston, Ontario K7L 3N6
Canada

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