Terrorist Attacks, Analyst Sentiment, and Earnings Forecasts

Author:

Cuculiza Carina1ORCID,Antoniou Constantinos2ORCID,Kumar Alok1ORCID,Maligkris Anastasios2

Affiliation:

1. Department of Finance, Miami Herbert Business School, University of Miami, Coral Gables, Florida 33124;

2. Finance Group, Warwick Business School, University of Warwick Coventry, West Midlands CV4 7AL, United Kingdom

Abstract

We examine whether exogenous and extremely negative events, such as terrorist attacks and mass shootings, influence the sentiment and forecasts of sell-side equity analysts. We find that analysts who are local to these attacks issue forecasts that are relatively more pessimistic than the consensus forecast. This effect is stronger when the analyst is closer to the event and located in a low-crime region. Impacted analysts are also relatively more pessimistic around the one- and two-year anniversaries of the attacks. Collectively, these findings indicate that exposure to extreme negative events affects the behavior of information intermediaries and the information dissemination process in financial markets. This paper was accepted by David Simchi-Levi, finance.

Publisher

Institute for Operations Research and the Management Sciences (INFORMS)

Subject

Management Science and Operations Research,Strategy and Management

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