Bart Frijns

We study the relationship between analyst forecast dispersion, a proxy for the opacity of the information environment, and equity market quality surrounding FOMC announcements. Higher forecast dispersion is associated with changes in various market quality metrics. First, trading costs increase as reflected in wider bid-ask spreads and elevated information asymmetry. Moreover, higher forecast dispersion is associated with heightened trading activity and less informationally efficient prices.

1 Introduction The empirical literature shows that (misguided) beliefs in contrarianism or momentum are important drivers that make investors trade (Grinblatt and Keloharju 2001).1 This dynamic relation between trading activity and past returns is referred to as feedback trading. Negative feedback traders buy securities after prices have fallen and sell them after prices have risen, while positive feedback traders do the reverse (De Long et al. 1990).

1 INTRODUCTION Board diversity has been a focus of academic research, mirroring a substantial interest from companies, investors, policymakers, and the media. Theoretically, a diverse board can provide broader perspectives and a wider range of ideas and deliver creative solutions to improve corporate outcomes (e.g., An et al., 2021; Jehn, 1995).