Macro disagreement and analyst forecast properties

Abstract

In this study, I examine whether macro disagreement, a higher-order uncertainty, affects the accuracy and informativeness of analysts’ earnings forecasts. Using macroeconomic dispersion measures from the Survey of Professional Forecasters database as a proxy for macro disagreement, I find that macro disagreement reduces forecast accuracy. I further explore this association for firms that are high in cyclicality and for analysts who enjoy more brokerage resources. The negative relationship between macro disagreement and forecast accuracy is more pronounced for firms that are high in cyclicality. I also find that brokerage resources have a moderating effect on the negative association between macro disagreement and forecast accuracy. I further find that the analyst earnings forecast is less informative to investors when macro disagreement is high.