Dynamic forecasting behavior by analysts: Theory and evidence

• 成果类型: Article; Proceedings Paper
• 署名作者: Clarke, J; Subramanian, A
• 署名单位: University System of Georgia; Georgia State University; University System of Georgia; Georgia Institute of Technology
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2005.03.008
• 发表日期: 2006
• 页码: 81-113
• 关键词: Analysts; career concerns; Employment risk; dynamic forecasting; herding

摘要

We develop a multi-period learning model to examine the relation between analysts' forecasting behavior and their performance. In a competitive market for banking services, the surplus and the analyst's payoff, which is determined through bargaining, are convex in her reputation. The convexity of her payoff structure and the presence of employment risk lead to a U-shaped relation between the analyst's forecast boldness and prior performance and a positive relation between forecast boldness and experience. We find support for these predictions in our empirical analysis. Significant underperformers (outperformers) face higher (lower) employment risk and are more likely to issue bolder forecasts. (c) 2005 Elsevier B.V. All rights reserved.