Analyst forecast performance on banks: does experience matter?

Lijing Du and Jian Huang

American Journal of Finance and Accounting, 2015, vol. 4, issue 2, 93-112

Abstract: In this paper we investigate the relation between analysts' forecast performance and the opacity of a company; in particular, we compare analysts' forecast accuracy between Bank Holding Companies (BHCs) and non-financial companies. During the period of 1999 to 2004, forecast accuracy on banks is better than forecast accuracy on non-financial firms; however, analysts forecast accuracy for banks is significantly worse for the period of 2005 to 2008. In addition, while analysts' experience is positively associated with their forecast performance for non-financial firms, there is no evidence that experience improves forecast accuracy for BHCs. That is, BHCs are more difficult to understand during current crisis, and that prior experience does not help as much compared to non-financial firms. Our results suggest an increase in uncertainty risk for BHC's leading up to the recent financial crisis.

Keywords: financial analysts; forecasting accuracy; analyst experience; bank holding companies; analyst forecasts; analyst performance; banking industry; forecasting performance; non-financial firms; uncertainty; risk; financial crisis. (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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