Experience of a job loss and analysts’ subsequent performance

We investigate the forecasting performance of analysts who have been rehired after experiencing a recent job loss as a result of the closure of the brokerage house they worked for. We find that forecasts of the displaced analysts are significantly more pessimistic relative to both their peers and actual earnings after they get rehired. Importantly, we also document a decline in the accuracy of their forecasts at their new job, which indicates that forecast pessimism is no better than forecast optimism for forecasting quality. Overall, our study provides empirical evidence that temporary negative employment shocks affect analysts’ subsequent forecasting performance.