Do Financial Analysts Herd?

Jin Yeub Kim, Yongjun Kim and Myungkyu Shim
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Jin Yeub Kim: Yonsei Univ
Yongjun Kim: Univ of Seoul

No 2019rwp-161, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: Financial analysts may have strategic incentives to herd or to anti-herd when issuing forecasts of firms' earnings. This paper develops and implements a new test to examine whether such incentives exist and to identify the form of strategic behavior. We use the equilibrium property of the finite-player forecasting game of Kim and Shim (2019) that forecast dispersion decreases as the number of forecasters increases if and only if there is strategic complementarity in their forecasts. Using the I/B/E/S database, we find strong evidence that supports strategic herding behavior of financial analysts. This finding is robust to different forecast horizons and sequential forecast release.

Keywords: financial analysts; earnings forecasting; finite-player forecasting game; strate- gic interaction; herding (search for similar items in EconPapers)
JEL-codes: D83 E37 G17 (search for similar items in EconPapers)
Pages: 20pages
Date: 2019-12
New Economics Papers: this item is included in nep-for and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Do Financial Analysts Herd? (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:yon:wpaper:2019rwp-161

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