Air pollution, affect, and forecasting bias: Evidence from Chinese financial analysts

Rui Dong, Raymond Fisman, Yongxiang Wang, Nianhang Xu

Research output: Contribution to journalArticlepeer-review

137 Citations (Scopus)


We document a negative relation between air pollution during corporate site visits by investment analysts and subsequent earnings forecasts. After accounting for analyst, weather, and firm characteristics, an extreme worsening of air quality from “good/excellent” to “severely polluted” is associated with a more than 1 percentage point lower profit forecast, relative to realized profits. We explore heterogeneity in the pollution-forecast relation to understand better the underlying mechanism. Pollution only affects forecasts that are announced in the weeks immediately following a visit, indicating that mood likely plays a role, and the effect of pollution is less pronounced when analysts from different brokerages visit on the same date, suggesting a debiasing effect of multiple perspectives. Finally, there is suggestive evidence of adaptability to environmental circumstances – forecasts from analysts based in high pollution cities are relatively unaffected by site visit pollution.
Original languageEnglish
Pages (from-to)971-984
Number of pages14
JournalJournal of Financial Economics
Issue number3
Early online date17 Dec 2019
Publication statusPublished - 1 Mar 2021
Externally publishedYes


  • Adaptation
  • Forecasting bias
  • Investment analysts
  • Pollution


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