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  • February 2005
  • Article
  • Journal of Finance

Financial Analyst Characteristics and Herding Behavior in Forecasting

By: Michael B. Clement and Senyo Tse
  • | Pages:35
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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.
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About The Author

Michael B. Clement

Accounting and Management
→More Publications

More from the Authors

    • October–November 2019
    • Journal of Business Finance & Accounting

    A New Perspective on Post-Earnings-Announcement-Drift: Using a Relative Drift Measure

    By: Michael Clement, Joonho Lee and Kevin Ow Yong
    • Journal of Accounting & Economics

    Managing the Narrative: Investor Relations Officers and Their Interactions with Sell-Side Analysts and Institutional Investors

    By: Lawrence D. Brown, Andrew C. Call, Michael B. Clement and Nathan Y. Sharp
    • August 2016
    • Journal of Accounting & Economics

    The Activities of Buy-Side Analysts and the Determinants of Their Stock Recommendations

    By: Lawrence D. Brown, Andrew C. Call, Michael B. Clement and Nathan Y. Sharp
More from the Authors
  • A New Perspective on Post-Earnings-Announcement-Drift: Using a Relative Drift Measure By: Michael Clement, Joonho Lee and Kevin Ow Yong
  • Managing the Narrative: Investor Relations Officers and Their Interactions with Sell-Side Analysts and Institutional Investors By: Lawrence D. Brown, Andrew C. Call, Michael B. Clement and Nathan Y. Sharp
  • The Activities of Buy-Side Analysts and the Determinants of Their Stock Recommendations By: Lawrence D. Brown, Andrew C. Call, Michael B. Clement and Nathan Y. Sharp
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