Who herds?

Bernhardt, Dan; Campello, Murillo; Kutsoati, Edward

doi:10.1016/j.jfineco.2005.07.006

Cited by 210 publications

(90 citation statements)

References 14 publications

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“…Zitzewitz (2001) and Bernhardt et al (2006) also find that the best predictor of future extremism in analyst forecasts is past extremism. We extend these results by showing that extremism persists when out-of-consensus analysts learn that they have made an incorrect earnings forecast, and that this pattern is detrimental to analysts’ accuracy and probability of receiving awards.…”

Section: Relevant Literaturementioning

confidence: 88%

Do sell-side stock analysts exhibit escalation of commitment?

Beshears

Milkman

2011

Journal of Economic Behavior & Organization

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a b s t r a c tThis paper presents evidence that when an analyst makes an out-of-consensus forecast of a company's quarterly earnings that turns out to be incorrect, she escalates her commitment to maintaining an out-of-consensus view on the company. Relative to an analyst who was close to the consensus, the out-of-consensus analyst adjusts her forecasts for the current fiscal year's earnings less in the direction of the quarterly earnings surprise. On average, this type of updating behavior reduces forecasting accuracy, so it does not seem to reflect superior private information. Further empirical results suggest that analysts do not have financial incentives to stand by extreme stock calls in the face of contradictory evidence. Managerial and financial market implications are discussed.

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Section: Relevant Literaturementioning

confidence: 88%

Do sell-side stock analysts exhibit escalation of commitment?

Beshears

Milkman

2011

Journal of Economic Behavior & Organization

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“…In addition, Bernhardt et al (2006) show that the test statistic is robust to correlated forecast errors, market-wide shocks and outliers. The sample period in this study covers the global financial crises and the period of nontraditional monetary policy in the US, which can be considered as market-wide shocks and/ or outliers.…”

Section: Nonparametric Herding Testmentioning

confidence: 93%

“…We use a nonparametric test proposed by Bernhardt et al (2006) to examine forecasters' (anti) herding behaviour. Using information in an information set Ω t , the forecaster is expected to form a posterior distribution over the future exchange rate.…”

Section: Nonparametric Herding Testmentioning

confidence: 99%

“…Therefore, this study uses a recently developed robust test by Bernhardt et al (2006) to investigate whether the ZAR forecasters (anti) herd. Considerable effort has been devoted to herding behaviour because it is considered one of the key phenomena to explain a large price swing in financial markets and the herding of market participants has significant impacts on economic activities (e.g., De Grauwe and Grimaldi, 2005).…”

Section: Introductionmentioning

confidence: 99%

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Asymmetric loss and herding behaviour of exchange rate forecasters: evidence from South Africa

Tsuchiya

Kato

2015

Applied Economics

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This study examines the asymmetry of the loss function for private forecasters in exchange rate forecasts of the South African rand. It tests rationality under the possibility of an asymmetric loss function. The results indicate less evidence of asymmetry for a horizon of 1 month but considerable evidence of asymmetry for a horizon of 3 months. However, the shapes of the distributions formed by estimated asymmetry parameters of sub-samples for each forecaster are symmetric, regardless of the forecast horizons, which implies that these forecasters do not herd or antiherd. In fact, the results of our empirical herding test show that forecasters neither herd nor antiherd, which is in sharp contrast to recent findings on antiherding for foreign exchange rates in emerging market economies. Our findings provide consistent evidence for a recent suggestion that antiherding might result in the rejection of rationality, even under asymmetric loss functions. Our findings also suggest that central bank transparency might be associated with herding behaviours.

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“…To stand out and build consumer awareness, some analysts inevitably boast by exaggerating their differences. Thus, analysts may "anti-herd" or issue forecasts far different from the consensus (Zitzewtiz, 2001;Bernhardt et al, 2006;Naujoks et al, 2007). Furthermore, analysts with lower capability (Trueman, 1994) or high market reputations (Graham, 1999) are also documented to be keen on herding to protect their market status as well as compensations.…”

Section: Analyst Herdingmentioning

confidence: 99%

Do Security Analysts Herd on Stock Recommendations and Does It Affect Returns?

Lin

Jang²,

Tsang³

2013

IJEF

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This study explores the herding behavior of security analysts, the firm characteristics in attracting herding, and the consequences of the herding recommendations on returns in China's stock market. By applying the LSV method, the stock recommendations of analysts are partitioned into buy-and sell-recommendations. The results show that the herding level of sell-recommendation is greater than that of buy-recommendation, which is particularly evident in the bear market. Moreover, investors selling the holdings that analysts herd to recommend "sell" might help avoid losses in the bear market. Notably, when in the bull market, if analysts herd to make sell-recommendations, investors might gain more by acting conversely. These performance variations according to market sentiments appear to be partially explained by a firm's characteristics based on additional regression analyses and are partially attributed to analysts' individual attitudes toward market sentiments.

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Who herds?

Cited by 210 publications

References 14 publications

Do sell-side stock analysts exhibit escalation of commitment?

Do sell-side stock analysts exhibit escalation of commitment?

Asymmetric loss and herding behaviour of exchange rate forecasters: evidence from South Africa

Do Security Analysts Herd on Stock Recommendations and Does It Affect Returns?

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