Does climate risk influence analyst forecast accuracy?

Authors

Incheol Kim, The University of Texas Rio Grande ValleyFollow
Suin Lee, The University of Texas Rio Grande ValleyFollow
Ji Woo Ryou, West Virginia University

Document Type

Article

Publication Date

12-2024

Abstract

We examine how climate risk influences analyst forecast accuracy proxied by forecast error and dispersion. Using country-level climate risk estimated with time trends in droughts, we find that analyst forecasts are less accurate for firms in drought-prone countries. This effect of climate risk is stronger when climate risks are denoted in earnings forecasts, and when firms’ home countries have greater reliance on hydroelectric sources in electricity generation, more important agricultural and food industries, and active stances concerning climate change. Overall, our findings suggest noteworthy implications of climate risk on the financial markets via analyst forecast accuracy.

Comments

Original published version available at https://doi.org/10.1016/j.jfs.2024.101345

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Publication Title

Journal of Financial Stability

DOI

10.1016/j.jfs.2024.101345

Recommended Citation

Kim, Incheol, Suin Lee, and Jiwoo Ryou. "Does climate risk influence analyst forecast accuracy?." Journal of Financial Stability 75 (2024): 101345. https://doi.org/10.1016/j.jfs.2024.101345