Publications
Publications
- February 2005
- Journal of Finance
Financial Analyst Characteristics and Herding Behavior in Forecasting
By: Michael B. Clement and Senyo Tse
Abstract
This study classifies analysts' earnings forecasts as herding or bold and finds that (1) boldness likelihood increases with the analyst's prior accuracy, brokerage size, and experience and declines with the number of industries the analyst follows, consistent with theory linking boldness with career concerns and ability; (2) bold forecasts are more accurate than herding forecasts; and (3) herding forecast revisions are more strongly associated with analysts' earnings forecast errors (actual earnings—forecast) than are bold forecast revisions. Thus, bold forecasts incorporate analysts' private information more completely and provide more relevant information to investors than herding forecasts.
Keywords
Experience and Expertise; Forecasting and Prediction; Performance Evaluation; Financial Services Industry
Citation
Clement, Michael B., and Senyo Tse. "Financial Analyst Characteristics and Herding Behavior in Forecasting." Journal of Finance 60, no. 1 (February 2005): 307–341.