Security Analysts' Career Concerns and Herding of Earnings Forecasts
Several theories of reputation and herd behavior (e.g., Scharfstein and Stein (1990), and Zwiebel (1995)) suggest that herding among agents should vary with career concerns. Our goal is to document whether such a link exists in the labor market for security analysts. We find that inexperienced analy...
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| Veröffentlicht in: | The Rand journal of economics 2000-04, Vol.31 (1), p.121-144 |
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| creator | Hong, Harrison Kubik, Jeffrey D. Solomon, Amit |
| description | Several theories of reputation and herd behavior (e.g., Scharfstein and Stein (1990), and Zwiebel (1995)) suggest that herding among agents should vary with career concerns. Our goal is to document whether such a link exists in the labor market for security analysts. We find that inexperienced analysts are more likely to be terminated for inaccurate earnings forecasts than are their more experienced counterparts. Controlling for forecast accuracy, they are also more likely to be terminated for bold forecasts that deviate from the consensus. Consistent with these implicit incentives, we find that inexperienced analysts deviate less from consensus forecasts. Additionally, inexperienced analysts are less likely to issue timely forecasts, and they revise their forecasts more frequently. These findings are broadly consistent with existing career-concern-motivated herding theories. |
| doi_str_mv | 10.2307/2601032 |
| format | Article |
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Our goal is to document whether such a link exists in the labor market for security analysts. We find that inexperienced analysts are more likely to be terminated for inaccurate earnings forecasts than are their more experienced counterparts. Controlling for forecast accuracy, they are also more likely to be terminated for bold forecasts that deviate from the consensus. Consistent with these implicit incentives, we find that inexperienced analysts deviate less from consensus forecasts. Additionally, inexperienced analysts are less likely to issue timely forecasts, and they revise their forecasts more frequently. 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Our goal is to document whether such a link exists in the labor market for security analysts. We find that inexperienced analysts are more likely to be terminated for inaccurate earnings forecasts than are their more experienced counterparts. Controlling for forecast accuracy, they are also more likely to be terminated for bold forecasts that deviate from the consensus. Consistent with these implicit incentives, we find that inexperienced analysts deviate less from consensus forecasts. Additionally, inexperienced analysts are less likely to issue timely forecasts, and they revise their forecasts more frequently. These findings are broadly consistent with existing career-concern-motivated herding theories.</abstract><cop>Santa Monica</cop><pub>Rand</pub><doi>10.2307/2601032</doi><tpages>24</tpages></addata></record> |
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| subjects | Accuracy Agency theory Analytical estimating Analytical forecasting Brokerage houses Career development Careers Coefficients Earnings Economic analysis Economic behaviour Economic forecasts Economic models Economic theory Employment Evaluation Financial analysts Forecasts Forecasts and trends Herding Herds Job performance evaluation Labor market Labor markets Labour market Modeling Personnel management Probabilities Profit Securities Securities analysis Studies |
| title | Security Analysts' Career Concerns and Herding of Earnings Forecasts |
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