Media sentiment divergence and analyst earnings forecasts

We examine whether media sentiment divergence (MSD), which refers to divergence in sentiment across the media’s coverage of a firm, is associated with the accuracy of analyst earnings forecasts. Our results reveal that the level of a firm’s MSD is positively associated with analyst forecast accuracy. In addition, we find that the time required by analysts to make their first annual earnings forecast is positively associated with MSD, suggesting that analysts need more time to process information from the media. Overall, we provide evidence that heterogeneity in the media’s interpretation of corporate news is an important factor affecting analysts’ forecast.