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William Greif

19 May 2022
WORKING PAPER SERIES - No. 2664
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Abstract
This paper documents a durable increase in the cross-sectoral dispersion of earnings expectations during the COVID-19 crisis. The rise in dispersion of earnings forecasts can be explained by the introduction of lockdown measures, which had a particularly adverse impact on the travel sector. Accordingly, in terms of earnings expectations, countries that are relatively independent of the travel sector were least affected by a tightening of lockdowns. At the same time, vaccinations have been a game changer: more stringent lockdown measures added far less to the cross-sectoral dispersion in earnings expectations once vaccines started to be rolled out in late 2020. Going forward, the dispersion in earnings expectations continues to stand at elevated levels.
JEL Code
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G10 : Financial Economics→General Financial Markets→General
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
5 August 2021
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 5, 2021
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Abstract
More than a year after the onset of the COVID-19 crisis, euro area stock prices have risen close to all-time highs, mainly driven by a recovery in earnings expectations. However, COVID-19 and the associated lockdowns have left a larger and longer-lasting mark on some companies than on others. Indeed, earnings expectations have become more heterogeneous across sectors, in line with expectations of an uneven recovery. This stands in sharp contrast with the developments during the Global Financial Crisis, when cross-sectoral dispersion first dropped and then normalised.Empirical analysis suggests that cross-sectoral dispersion in 12-month earnings per share forecasts has increased with each tightening of lockdown measures. At the same time, the start of vaccination campaigns has been a game changer: since the vaccine rollout began in late 2020, more stringent lockdown measures have added far less to the dispersion in earnings expectations.
JEL Code
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G10 : Financial Economics→General Financial Markets→General
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates