Flying too close to the Sun – The effect of Federal Reserve rate disclosure on analyst forecasts

Prof. Wen LIN
Assistant Professor
Central University of Finance and Economics

Date: 10 November 2023 (Friday)
Time: 2:30 pm to 4:00 pm
Venue: E22-G015
Host: Prof. Duncan LIU, Assistant Professor in Accounting
Online registration:


We propose that the Federal Reserve’s (FED) central position in the economy results in analysts’ overweighting FED’s disclosure, which results in optimistic and inaccurate forecasts. Using the Federal Open Market Committee (FOMC) meetings to identify disclosures of the federal fund rate, a major monetary policy mechanism, we confirm that analysts overreact to unexpected rate news. Overreaction varies with the (i) sophistication of analysts, (ii) analyst distraction, (iii) direction of the rate surprise, and (iv) is higher for firms where the sensitivity of earnings to rate changes is more difficult to assess. Higher forecast optimism results in less accurate analyst consensus forecast distorting earnings benchmarks used in evaluating quarterly earnings announcements. The result contrasts the earlier evidence that analysts underreact to macroeconomic surprises (Hugon, Kumar and Lin 2016). The findings suggest the dominant position of the FED in the economy distorts how sophisticated market participants incorporate monetary policy disclosure.


Wen Lin is an Assistant professor in accounting at the Central University of Finance and Economics, China. She earned a PhD in Accounting and Finance from Lancaster University Management School. She focuses on empirical research to explore the effects of financial reporting on business decisions. She is also interested in the economic consequences of mandatory and voluntary disclosure by both public and private firms. She has published in leading accounting journals such as Review of Accounting Studies.

 All are welcome!