Analysts' Accuracy Following Information Shocks: Evidence from the Art Market

Abstract

Analysts quantify price uncertainty through their estimates. This study utilizes the art market as an exogenous setting to explore how an increase in price uncertainty (e.g., the death of an artist) impacts the accuracy and precision of analysts' estimates. We find that in the year following an artist's death, analysts' accuracy decreases by 14%. Sub-sample analysis indicates that the level of market attention and the artists' reputation before their death are the likely economic mechanisms influencing this decrease. These findings suggest that analysts perform poorly following information shocks which is pertinent for many real asset markets.

Keywords: Price Uncertainty, Alternative Assets, Cultural Finance

JEL Classification: G11, G14, Z11