Vol. 18, No. 3, 2020
Roger K. Loh and René M. Stulz
Little is known about whether the value of sell-side research is different in bad times compared to good times. Because uncertainty is high in bad times, investors find it harder to assess firm prospects and hence should value analyst output more. However, higher uncertainty makes analysts’ tasks harder, so it is unclear whether analyst output is more valuable in bad times. We find that in bad times, analyst revisions have a larger stockprice impact, earnings forecast errors per unit of uncertainty fall, and analyst reports are more frequent and longer. These results are consistent with analysts working harder and investors relying more on analysts in bad times.