Air pollution, affect, and forecasting bias: Evidence from Chinese financial analysts

• 成果类型: Article
• 署名作者: Dong, Rui; Fisman, Raymond; Wang, Yongxiang; Xu, Nianhang
• 署名单位: Renmin University of China; Boston University; University of Southern California; Shanghai Jiao Tong University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2019.12.004
• 发表日期: 2021
• 页码: 971-984
• 关键词: pollution; Forecasting bias; Investment analysts; adaptation

摘要

We document a negative relation between air pollution during corporate site visits by investment analysts and subsequent earnings forecasts. After accounting for analyst, weather, and firm characteristics, an extreme worsening of air quality from good/excellent to severely polluted is associated with a more than 1 percentage point lower profit forecast, relative to realized profits. We explore heterogeneity in the pollution-forecast relation to understand better the underlying mechanism. Pollution only affects forecasts that are announced in the weeks immediately following a visit, indicating that mood likely plays a role, and the effect of pollution is less pronounced when analysts from different brokerages visit on the same date, suggesting a debiasing effect of multiple perspectives. Finally, there is suggestive evidence of adaptability to environmental circumstances - forecasts from analysts based in high pollution cities are relatively unaffected by site visit pollution. (C) 2019 Elsevier B.V. All rights reserved.