The Performance of Equity Analysts During the Global Financial Crisis

This paper investigates the response of equity analysts following Australian and US listed stocks to the onset of the 2007 Global Financial Crisis. Both groups of analysts reacted quickly by adjusting their forecasts downwards, and initially tending towards being overly pessimistic. Relative to pre-crisis data, the authors identify sharp declines in earnings forecasts, an increase (decrease) in downward (upward) revisions, and a downward (upward) trend in sell (buy) recommendations. Forecast errors are larger, and dispersion of earnings forecasts is higher. Finally, the most accurate analysts in the pre-crisis period continue to be significantly more accurate during the crisis period than their peers.