Herding on Earnings News


Book Description

We examine the role of institutional investors underlying post-earnings-announcement drift (PEAD). Our results show that while institutional investors generally herd on earnings news, such correlated trading among institutions does not eliminate or reduce market underreaction to earnings surprises. Instead, PEAD is significant only in the subsample of stocks where institutions herd in the same direction as earnings surprises. In fact, institutional herding is also positively related to next-quarter earnings announcement returns. We provide evidence that institutional herding on or against earnings news is largely driven by firm characteristics, particularly past firm performance and stock returns. In addition, we find that relative to non-transient institutions, transient institutions have a stronger tendency to herd on earnings information. Finally, based on long-run stock returns, we show that when institutions herd on earnings surprises, institutional trading represents a gradual process of incorporating information into stock prices. On the other hand, when institutions herd against earnings surprises, institutional trading slows down stock price discovery.







Mutual Fund Herding and Dispersion of Analysts' Earnings Forecasts


Book Description

We examine the relation between herding of mutual funds and dispersion of analysts' earnings forecasts to ascertain whether it is the lack of information or the arrival of correlated information that induces herding. Results show that the level of herding in individual stocks is positively related to the dispersion measure. Herding is also related to other information quality variables such as stock return volatility and analyst coverage. Our results suggest that fund managers herd in response to lack of reliable information, rather than to exploit correlated fundamental information. Although market capitalization and trading volume are also related to herding, they seem to capture the firm characteristic to which mutual funds are attracted to (or repelled from). Our evidence indicates that buy- and sell-herding respond asymmetrically to information uncertainty. Sell-herding is more prevalent and is positively related to forecast dispersion. Buy-herding, on the other hand, is not related to dispersion. The asymmetric relationship between herding and information uncertainty is consistent with the quot;prospect theoryquot; and quot;sharing-of-the-blamequot; under bad news.




Hidden in the Woodshed


Book Description

This paper demonstrates that bad news herding is actually accompanied by bad news over-reporting. By focusing on write-offs during two major recessions of 2001 and 2008 and taking advantage of a unique hand-collected dataset on reversals of restructuring charges, we document that when firms herd in their negative reports, they over-state bad news, creating a cushion that can be reversed in the future. Specifically, we show that: (1) large write-offs by early firms are followed by clustered write-offs by their peer firms; (2) herding firms over-report and subsequently partially reverse their write-offs; and (3) the reversals help herding firms to meet financial analysts' earnings forecasts that otherwise would not be met. Taken together, these results lend credence to the following mechanism behind bad news herding: firms strategically engage in herding with excessive bad news reports to benefit from subsequent reversals.







Herding Donkeys


Book Description

After the 2004 election, the Republican Party held the White House, both houses of Congress, twenty-eight governorships, and a majority of state legislatures. One-party rule, it seemed, was here to stay. Herding Donkeys tells the improbable tale of the grassroots resurgence that transformed the Democratic Party from a lonely minority to a sizable majority. It chronicles the inside story of Howard Dean's visionary yet deeply controversial fifty-state strategy, charting his unpredictable journey from insurgent presidential candidate, to front-running flameout, to chairman and conscience of the Democratic Party in an unexpected third act. Ari Berman reveals how the Obama campaign built upon Dean's strategy when others ridiculed it, expanding the ranks of the party and ultimately laying the groundwork for Obama's historic electoral victory—but also sowing the seeds of dissent that would lead to legislative stalemate and intraparty strife. Revelatory and entertaining, in the vein of Timothy Crouse's The Boys on the Bus and Rick Perlstein's Nixonland, Herding Donkeys combines fresh reportage with a rich and colorful cast of characters. It captures the untold stories of the people and places that reshaped the electoral map, painting a vivid portrait of a shifting country while dissecting the possibility and peril of a new era in American politics.




Advances in Accounting Behavioral Research


Book Description

Focusing on research that examines both individual and organizational behavior relative to accounting, this volume of Advances in Accounting Behavioral Research offers a perspectives on topics such as tax compliance, risk judgement, and affiliation bias.




Financial Literacy


Book Description

This book provides an overview of current issues associated to financial literacy improvement. In selecting and structuring the material to include, the primary criterion has been applicability of topics and recommendations and accuracy of trends toward better financial literacy level. Each chapter is dedicated to a particular component of financial literacy from education to capability. Throughout the book, there are many practices initiated around the world which, regardless of their superiority, are all useful initiatives and can roll play as a spot light in the road of improvement for both investors and authorities. This book is not only applicable for academics and students, but authorities who aim to improve financial literacy (and subsequently financial capability) among individuals and for those investors who seek to improve their own financial literacy.




Bubbles and Contagion in Financial Markets, Volume 2


Book Description

This book focuses on extending the models and theories (from a mathematical/statistical point of view) which were introduced in the first volume to a more technical level. Where volume I provided an introduction to the mathematics of bubbles and contagion, volume II digs far more deeply and widely into the modeling aspects.




Determinants of Earnings Forecast Error, Earnings Forecast Revision and Earnings Forecast Accuracy


Book Description

​Earnings forecasts are ubiquitous in today’s financial markets. They are essential indicators of future firm performance and a starting point for firm valuation. Extremely inaccurate and overoptimistic forecasts during the most recent financial crisis have raised serious doubts regarding the reliability of such forecasts. This thesis therefore investigates new determinants of forecast errors and accuracy. In addition, new determinants of forecast revisions are examined. More specifically, the thesis answers the following questions: 1) How do analyst incentives lead to forecast errors? 2) How do changes in analyst incentives lead to forecast revisions?, and 3) What factors drive differences in forecast accuracy?