Analysts Get SAD Too: The Effects of Seasonal Affective Disorder on Stock Analysts’ Earnings Estimates

Previous research finds that stock analysts exhibit both optimistic and pessimistic biases in their earnings forecasts, with the net result being a consistent but declining overestimation of forecasted earnings. We extend this research by examining the potential effect of seasonal affective disorder (SAD), a documented psychological condition that produces heightened pessimism and risk aversion during the fall and winter months, on stock analysts' earnings estimates. Our results suggest that analysts are generally optimistic in their forecasts but significantly less so during SAD months. We also find this relation to be most pronounced for analysts located in northern states, who should be the ones most impacted by the disorder. We conclude that while the effect of SAD appears to be present, it actually seems to overcome an existing positive bent in earnings forecasts, thereby making estimates more accurate. Our findings add to the existing literature by identifying an additional psychological bias that could potentially influence stock analysts' earnings estimates.