Financial markets forecasts revisited: Are they rational, stubborn or jumpy?

This paper evaluates professional forecasters’ behavior using a panel data of individual forecasts. We find that (i) professional forecasts are behavioral, and (ii) there exists a stock–bond dissonance: the forecasting behavior seems to be stubborn in the stock market, but jumpy in the bond market. Even in the same country, forecasting behavior is quite different by market.

[1]  Jeffrey D. Kubik,et al.  Security Analysts' Career Concerns and Herding of Earnings Forecasts , 1998 .

[2]  Eric J. Johnson,et al.  Incorporating the Irrelevant: Anchors in Judgments of Belief and Value , 2002 .

[3]  Kathryn Graddy,et al.  Anchoring Effects: Evidence from Art Auctions , 2009 .

[4]  Werner F. M. De Bondt,et al.  Herding in analyst earnings forecasts: evidence from the United Kingdom , 1999 .

[5]  Victor L. Bernard,et al.  Tests of Analysts' Overreaction/Underreaction to Earnings Information as an Explanation for Anomalous Stock Price Behavior , 1992 .

[6]  Stephen J. Hoch,et al.  An Anchoring and Adjustment Model of Purchase Quantity Decisions , 1998 .

[7]  Masahiro Ashiya,et al.  Testing the rationality of Japanese GDP forecasts: the sign of forecast revision matters , 2003 .

[8]  Owen A. Lamont.  Macroeconomic forecasts and microeconomic forecasters , 2002 .

[9]  S. Titman,et al.  Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior , 1994 .

[10]  Senyo Tse,et al.  Financial Analyst Characteristics and Herding Behavior in Forecasting , 2005 .

[11]  M. Ashiya.  Strategic bias and professional affiliations of macroeconomic forecasters , 2009 .

[12]  H. Sabourian,et al.  Herding and Contrarian Behavior in Financial Markets , 2009 .

[13]  Yoshiyuki Nakazono.  Heterogeneity and anchoring in financial markets , 2012 .

[14]  W. Newey,et al.  A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelationconsistent Covariance Matrix , 1986 .

[15]  Y. Ganzach,et al.  Overreaction and underreaction in analysts' forecasts , 1998 .

[16]  W. Newey,et al.  A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelationconsistent Covariance Matrix , 1986 .

[17]  T. Day,et al.  Following the leader: ☆: a study of individual analysts’ earnings forecasts , 2001 .

[18]  William D. Nordhaus,et al.  Forecasting Efficiency: Concepts and Applications , 1987 .

[19]  A. Tversky,et al.  Judgment under Uncertainty: Heuristics and Biases , 1974, Science.

[20]  I. Welch.  Herding among security analysts , 2000 .

[21]  Tilman Ehrbeck,et al.  Why Are Professional Forecasters Biased? Agency versus Behavioral Explanations , 1996 .

[22]  Using Survey Data to Correct the Bias in Policy Expectations Extracted from Fed Funds Futures , 2009 .

[23]  M. Arellano,et al.  Computing Robust Standard Errors for Within-Groups Estimators , 2009 .

[24]  J. Graham,et al.  Herding Among Investment Newsletters: Theory and Evidence , 1998 .

[25]  M. Ashiya,et al.  Herd behavior of Japanese economists , 2001 .