Determinants of the relationship between investor sentiment and analysts' private information production

We examine whether and how investor sentiment affects analysts' private information production and the factors that moderate this influence. As expected, analysts' private information production (measured by the information asymmetry component of analyst forecast dispersion) is significantly negatively associated with investor sentiment. Our tests also show that higher institutional holdings of stock, longer analysts' earnings forecasting experience, and higher levels of short selling of stock mitigate this negative influence of sentiment on analysts' private information production. Our findings are informative for researchers, financial analysts, and market participants who rely on analysts' forecasts to form earnings expectations.