Panic herding: analysts' Covid-19 experiences and the interpretation of earnings news

Abstract

This paper examines how local experiences of the Covid-19 pandemic affect sell-side analysts’ processing of earnings news. Exploiting variation in the intensity and timing of local outbreaks, I show that analysts who are more exposed to the virus tend to herd more closely with the consensus forecast. However, I find no evidence of increases in forecast pessimism. The data are consistent with the intensity of exposure to pandemic having a first order effect on analysts’ risk attitudes, rather than on the bias of their stated expectations.