Download this Paper Open PDF in Browser

Security Analysts' Career Concerns and Herding of Earnings Forecasts

35 Pages Posted: 11 Jan 1999  

Jeffrey D. Kubik

Syracuse University - Department of Economics

Amit Solomon

Salomon Smith Barney

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: July 1998

Abstract

Several theories of reputation and herding (see, e.g., Scharfstein and Stein (1990)) suggest that herding among agents should vary with career concerns. Our goal in this paper is to document whether such a link exists in the labor market for security analysts. Specifically, we look at the relationship between an analyst's job tenure (a proxy for career concerns) and various measures of stock earnings forecast performance. We establish the following key results. (1) Older analysts are more likely to produce earnings forecasts of firms before younger ones. (2) Their forecasts also deviate more from the consensus forecast than their younger counterparts. We argue that these results are consistent with some reputational models of herding. We also establish a number of auxiliary findings regarding the relationship between forecast accuracy and frequency of forecast revisions with job tenure.

JEL Classification: G14, G12, G29, J44

Suggested Citation

Kubik, Jeffrey D. and Solomon, Amit and Hong, Harrison G., Security Analysts' Career Concerns and Herding of Earnings Forecasts (July 1998). Available at SSRN: https://ssrn.com/abstract=142895 or http://dx.doi.org/10.2139/ssrn.142895

Jeffrey D. Kubik

Syracuse University - Department of Economics ( email )

426 Eggers Hall
Syracuse, NY 13244-1020
United States
315-443-9063 (Phone)
315-443-1081 (Fax)

Amit Solomon

Salomon Smith Barney ( email )

7 World Trade Center, 32nd floor
New York, NY NY 10048
United States
+1 (212) 783 5601 (Phone)
+1 (212) 783 4266 (Fax)

Harrison G. Hong (Contact Author)

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Paper statistics

Downloads
1,124
Rank
14,557
Abstract Views
4,572