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Do German security analysts herd?

Aretz, Kevin and Naujoks, M and Kerl, A and Walter, A (2009) Do German security analysts herd? Financial Markets and Portfolio Management, 23 (1). pp. 3-29. ISSN 1555-4961

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Abstract

We employ an innovative methodology suggested by Bernhardt et al. (J. Financ. Econ. 80:657–675, 2006) to examine the herding (or anti-herding) behavior of German analysts regarding earnings forecasts. This methodology avoids well-known shortcomings often encountered in related studies, such as correlated information signals, unexpected common shocks to earnings, systematic optimism or pessimism, or forecast target mismeasurement. Our findings suggest that German analysts anti-herd, that is, they systematically issue earnings forecasts that are further away from the consensus forecast than their private information indicates. Furthermore, we analyze the association between herding behavior and different characteristics, including the size of the brokerage, general or firm-specific experience, and the coverage of firms on the Neuer Markt. We mainly confirm findings for the United States, for example, that anti-herding is more severe in cases of higher competition among analysts. Contrary to anecdotal evidence, we also find anti-herding behavior in earnings forecasts for Neuer Markt firms during the “new economy” bubble.

Item Type: Article
Journal or Publication Title: Financial Markets and Portfolio Management
Uncontrolled Keywords: Earnings forecasting - Security analysts - Herding behavior - German stock market
Subjects: H Social Sciences > HG Finance
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 31721
Deposited By: Dr Kevin Aretz
Deposited On: 10 Feb 2010 11:52
Refereed?: Yes
Published?: Published
Last Modified: 26 Jul 2012 17:00
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/31721

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