How Much Do Analysts Influence Each Other's Forecasts?

Jonathan B. Cohn () and Jennifer L. Juergens ()
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Jonathan B. Cohn: McCombs School of Business, The University of Texas at Austin, 2110 Speedway Stop - B6600, Austin, TX 78712, USA
Jennifer L. Juergens: Drexel University: LeBow College of Business, Gerri C. LeBow Hall, 3220 Market Street, Room 1128, Philadelphia, PA 19104, USA

Quarterly Journal of Finance (QJF), 2014, vol. 04, issue 03, 1-35

Abstract: This paper develops and applies a new approach for disentangling the influence of analysts on each other's earnings forecasts from the effects of correlated information shocks. We estimate that, on average, each cent a new forecast by an analyst is above (below) another analyst's most recent forecast causes the other analyst to revise her forecast upwards (downwards) by between 0.21 and 0.36 cents. More reputable analysts are more influential, while those that tend to be optimistic are less influential and are influenced more by the forecasts of other analysts. We do not find support for career concerns-driven herding or anti-herding. Finally, we find that more influential analysts are more likely to subsequently be ranked as All-Stars and to move from a less to a more prestigious brokerage house, and less likely to leave the analyst profession, suggesting that influence is a desirable characteristic.

Keywords: Stock analysts; earnings forecasts; herding; career concerns (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S2010139214500177

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