Forecast Dispersion and the Price Impact of Macroeconomic News
Samia Badidi
Working paper · July 2026
In one sentence
The relationship between forecast dispersion and the price impact of macroeconomic news depends on the experience composition of the forecaster pool.
Abstract
While a large literature in macro-finance examines how financial markets respond to macroeconomic news, little is known about how the composition of the forecaster pool shapes these responses. Using data on 25 major U.S. macroeconomic announcements, I document that forecast dispersion has a strong negative effect on market reactions, challenging the conventional interpretation of dispersion as a proxy for uncertainty. To reconcile this puzzle, I develop a noisy rational expectations model in which the informational content of dispersion depends on the share of experienced analysts. When the forecaster pool is primarily experienced, low dispersion indicates precise pre-announcement information, reducing the announcement's price impact. Conversely, when the pool is inexperienced, low dispersion reflects shrinkage toward noisy common information, increasing price impact. Using lagged analyst experience as an instrument, I confirm that the relationship between dispersion and price impact switches sign depending on the share of experienced analysts. These findings reveal an important channel through which analyst heterogeneity affects price discovery.
Presentations
Tilburg University, Toulouse School of Economics, 8th HEC Paris Finance PhD Workshop, 6th LTI-Bank of Italy Workshop, 8th Annual Dauphine Finance PhD Workshop, EFA 2025 Doctoral Tutorial, German Finance Association 31st Meeting, UT Dallas Fall Finance Conference (Poster), Inter-Finance PhD Seminar, 38th AFBC, and Colorado Finance Summit.
Citation
Badidi, Samia (2026). Forecast Dispersion and the Price Impact of Macroeconomic News. Working paper.