Do Financial Analysts Herd?

Jin Yeub Kim, Yongjun Kim, Myungkyu Shim

Research output: Contribution to journalArticlepeer-review


Financial analysts may have strategic incentives to herd or to anti-herd when issuing forecasts of firms' earnings. This paper develops and implements a new test to examine whether such incentives exist and to identify the form of strategic behaviour. We use the equilibrium property of the finite-player forecasting game of Kim and Shim [2019. “Forecast Dispersion in Finite-Player Forecasting Games.” The B.E. Journal of Theoretical Economics 19 (1).] that forecast dispersion decreases (resp. increases) as the number of forecasters increases if and only if there is strategic complementarity (resp. substitutability) in their forecasts. Using the I/B/E/S database, we find strong evidence that supports strategic herding incentive of financial analysts through a plausible natural experiment setting of brokerage house mergers. We show further that this finding is robust to different forecast horizons and is more pronounced for firms with low initial coverage.

Original languageEnglish
Pages (from-to)202-219
Number of pages18
JournalGlobal Economic Review
Issue number3
StatePublished - 2023


  • Financial analysts
  • earnings forecasting
  • finite-player forecasting game
  • herding
  • strategic interaction


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