Rest and Financial Judgments: The Impact of Holidays on Analyst Accuracy

Abstract

I examine whether holidays affect the judgment tasks of equity analysts. I find that earnings forecasts issued after holidays are, on average, more accurate than those issued before. Economically, this effect is equivalent to the impact of 20 months of experience on analyst accuracy. Using heuristic behavior as a proxy for improved rest, I find that analysts' use of heuristics declines after holidays. I examine and rule out greater information availability, increased attention, changes in sentiment, and deterioration in forecast accuracy before holidays as alternative mechanisms. Overall, the results suggest that short breaks from work meaningfully improve the quality of analysts’ performance.

Keywords: holidays, rest, heuristics, earnings forecast accuracy, boldness

JEL Classification: G00, G24