The Reopening Effect of COVID-19 Vaccines on Corporate Earnings

Abstract

We propose a test of the reopening effect of COVID-19 vaccines on corporate earnings using revisions of analyst earnings forecasts. We estimate a model of forecast revisions driven by expectations of an earnings reflation when vaccines arrive and the economy reopens. The model accounts for short-run earnings growth due to other factors such as government interventions before vaccines arrive. Estimates point to a significant reopening effect, which varies over time with vaccine news. To rule out a spurious effect common to crisis periods, we estimate our model for the Global Financial Crisis and find no reopening effect for this period.

Keywords: COVID-19, vaccines, reopening effect, corporate earnings, analyst earnings forecasts

JEL Classification: G30, G10, G12