Security Analysts' Career Concerns and Herding of Earnings Forecasts

Hong, Harrison; Kubik, Jeffrey D.; Solomon, Amit

doi:10.2307/2601032

Cited by 1,022 publications

(562 citation statements)

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“…Hong, Kubik, and Solomon (2000) test herding models along the lines of Scharfstein and Stein (1990), Trueman (1994), Zwiebel (1995), and Prendergast and Stole (1996). find that young analysts are more likely than their older counterparts to leave the profession because of poor forecast accuracy.…”

Section: Theory and Hypothesesmentioning

confidence: 99%

“…Hong, Kubik, and Solomon (2000) find that young analysts are more likely than their older counterparts to quit for poor forecast accuracy and bold forecasts. Furthermore, they find that young analysts are less bold than their older counterparts, consistent with the predictions of reputation based herding models (Gibbons & Murphy, 1992;Prendergast & Stole, 1996;Scharfstein & Stein, 1990;Zwiebel, 1995).…”

mentioning

confidence: 95%

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Distributors and film critics: does it take two to Tango?

2006

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Previous literature has documented the impact of critics on audience choices of movies. We investigate three issues regarding professional critics in the motion picture industry. First we document whether and to what extent critics and their recommendations exhibit a statistical bias toward specific studios. We show that reviews by a number of critics are significantly affected by the film distributor’s identity. A second question is whether audiences are able to distinguish between biased and unbiased critics. We cannot support the view that audiences put less weight on the views of biased critics; in fact, they may listen to them more. Third, we try to characterize critics who are more prone to bias. Surprisingly, but in accord with reputation models, we find that more reputable critics may be more biased; in particular, critics based in L.A. tend to significantly prefer specific studios. Copyright Springer Science+Business Media, LLC 2006Critics, Bias, Motion picture, Reputation,

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Section: Theory and Hypothesesmentioning

confidence: 99%

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confidence: 95%

Distributors and film critics: does it take two to Tango?

2006

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“…Third, we complement the literature on how the market learns about analyst ability by identifying a reputation-building mechanism that is incremental to contemporaneous properties of aggregate earnings forecasts, such as bias and boldness (Hong et al 2000;Chen et al 2005b;Clement and Tse 2005;Ke and Yu 2006). Additionally, disaggregated earnings do not require a significant time series of data to produce a viable signal, as earnings forecasting history, frequency, and timeliness do (Mikhail et al 1997;Cooper et al 2001;Chen et al 2005a, b).…”

Section: Introductionmentioning

confidence: 89%

Analyst reputation and the issuance of disaggregated earnings forecasts to I/B/E/S

2009

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Although sell-side analysts privately forecast revenues and expenses when producing earnings forecasts, not all analysts choose to provide I/B/E/S with earnings forecasts disaggregated into revenues and expenses. We investigate the role of reputation in explaining this decision. We find that analysts without established reputations are more likely than reputable analysts to issue disaggregated earnings forecasts to I/B/E/S, consistent with I/B/E/S exposure benefits accruing to analysts seeking to establish a reputation. Among less reputable analysts, those with high ability are more likely to disaggregate, consistent with this group reaping greater benefits from the exposure I/B/E/S provides. Additional tests support our primary hypotheses. Among less reputable analysts, those who disaggregate are more (less) likely to be promoted (demoted or terminated). The stock market responds similarly, with more weight assigned to earnings forecast revisions provided by analysts who disaggregate their earnings forecasts.

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“…That is, there needs to be at least one variable that influences analyst behavior that is not ex ante related to the firm's choice of underwriter. Following Ljungqvistet al (2006), we appeal to the career concerns arguments of Hong and Kubik (2003) and Hong et al (2000) to satisfy this condition. A good instrument for analyst behavior is one that captures these costs and benefits, but is not ex ante related to the firm's choice of underwriter.…”

Section: The Costs and Benefits Facing Analysts X Amentioning

confidence: 98%