An empirical evaluation of analysts’ herding behavior following Regulation Fair Disclosure

Individual risk tolerance and herding behaviors in financial forecasts

“…While these factors are very specific to the task and content of conducting financial forecasts, they relate very little to the characteristics of the persons producing these forecasts or their cognitive processes. A similar lack of focus on individuals is found in other contributions explaining variation in herding behavior with reputational reasons (Holmes, Kallinterakis, & Ferreira, 2013), releases of macro data (Galariotis, Rong, & Spyrou, 2015), regulation limiting selectively disclosed information (Hahn & Song, 2013;Mensah & Yang, 2008), opaqueness of firms' information environment (Leece & White, 2017), analysts' access to information (Christensen, Mikhail, Walther, & Wellman, 2017), analyst affiliation (Xue, 2017), brokerage size (Clement & Tse, 2005;, the number of industries followed (Clement & Tse, 2005), firm earnings uncertainty (Song, Kim, & Won, 2009), dispersion across recommendations , forecast revision frequency , forecast horizon (De Bondt & Forbes, 1999), analyst's prior accuracy (Clement & Tse, 2005), fee concerns (Trueman, 1994), career concerns (Clarke & Subramanian, 2006;Clement & Tse, 2005;Hong, Kubik, & Solomon, 2000;Nolte, Nolte, & Vasios, 2014), experience (Clement & Tse, 2005;Hong et al, 2000;Youssef & Rajhi, 2010), and trust building (Kadous, Mercer, & Thayer, 2009). It is clear from the above that many of the previous studies focus on variables that differ between each individual, such as prior forecast errors and experience; however, these variables describe the individuals in their job situation and do not relate to their personalities more generally.…”

Reading between the lines: An empirical examination of qualitative attributes of financial analysts’ reports

“…Theoretical studies posit that when analysts lack sufficient private information to produce accurate forecasts or recommendations, either through lack of effort or ability, they will tend to mimic outputs from strong analysts (Trueman, 1994;Arya et al, 2005). This herding behavior among analysts is an attempt to alleviate the observable effects of their lack of information and has been documented in empirical studies (e.g., Hong et al, 2000;Clement and Tse, 2005;Mensah and Yang, 2008). Bloomfield and Hales (2009) provide evidence that in some situations, analysts may use the consensus forecast as a substitute for individual effort.…”

Analyst Herding and Stock Price Crash Risk: Evidence from China

“…We obtain 15,718 firm-year observations of Chinese firms that issued A-shares from 2004 to 2012. We then exclude (i) firms with fewer than 30 weeks of stock return data, (ii) financial services firms, (iii) firm-year observations with insufficient financial data to obtain control variables, and (iv) firms followed by fewer than four analysts (following Mensah and Yang, 2008). The final sample has 4,821 firm-year observations.…”

“…Following Olsen (1996), Wylie (2005), and Mensah and Yang (2008), we adopt the degree of herding index approach to measure analyst herding. The approach uses the degree of deviation from the consensus forecast to assess the intensity of herding.…”