Analysts’ accuracy following an increase in uncertainty: Evidence from the art market

Abstract

This study utilizes the art market as an exogenous setting to explore how an increase in price uncertainty (i.e., the death of an artist) impacts the accuracy and forecast error of analysts’ estimates. We find that in the year following an artist's death, analysts’ accuracy decreases by 14% and their forecast error increases by 11%. Additional analysis indicates that the effect is due to a decrease in the estimation range, an increase in the forecast bias of analysts, and an increase in the price volatility of the artwork. These findings suggest that analysts perform poorly following an increase in uncertainty which is pertinent for asset markets.