No. 164: Working from Home and Analyst Forecasts: Evidence from Brokerage Office Crowdedness

We study whether and how working from home (WFH) affects sell-side analysts’ forecasts. We construct a granular and high-frequency measure of analysts’ exposure to WFH at the broker-office level. Holding the complexity of the forecasting task constant, we find that, on average, analysts with greater exposure to WFH issue more timely and optimistic forecasts. This effect amplifies for analysts with longer commuting hours. We further document heterogeneity in the effect of WFH on team forecasts, suggesting that WFH has a stronger negative effect on forecast accuracy when it cuts off face-to-face communication in teams and that a broker’s IT infrastructure can mitigate this effect. Collectively, these results shed light on the role of the working environment on analysts’ cognitive task performance.