When are investors' uncertainty judgments influenced by their perceptions about analyst herding?

Keshk, Walied

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https://hdl.handle.net/2142/42123 Copy

Description

Title

When are investors' uncertainty judgments influenced by their perceptions about analyst herding?

Author(s)

Keshk, Walied

Issue Date

2012-12

Director of Research (if dissertation) or Advisor (if thesis)

Elliott, W. Brooke

Doctoral Committee Chair(s)

Elliott, W. Brooke

Committee Member(s)

• Jackson, Kevin E.
• Krische, Susan D.
• Weisbenner, Scott

Department of Study

Accountancy

Discipline

Accountancy

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Analyst Herding
• Analyst Forecast Dispersion, Uncertainty Judgments
• Directional Preferences
• Temporal Order
• Earnings Volatility

Abstract

While prior research documents that analyst sometimes herd their forecasts, very few studies investigate how investors’ judgments are influenced by their perceptions about the likelihood of analyst herding. In this dissertation, I conduct two experimental studies to investigate conditions under which investors’ assessments of uncertainty about future earnings are influenced by their perceptions about the likelihood of analyst herding. My first study extends research on the determinants of forecasters’ uncertainty judgments by examining the joint influence of analyst forecast dispersion and earnings volatility on investors’ uncertainty judgments, to provide insights into whether investors consider the likelihood of analyst herding in a situation that allows for, but does not prompt investors to think of, herding. Results suggest that investors do not consider the likelihood of analyst herding based on the relation between analyst forecast dispersion and earnings volatility. My second study provides a potential explanation for the mixed findings documented in prior research about investors’ reactions to the likelihood of analyst herding by examining the joint influence of the temporal order and preference-consistency of analyst forecasts on investors’ uncertainty judgments. Results suggest that investors consider the likelihood of analyst herding, and perceptions about herding influence investors’ uncertainty judgments, when analyst forecasts are preference-inconsistent, but not when analyst forecasts are preference-consistent. In addition, my second study extends research on investors’ credulity by suggesting that motivated reasoning and skepticism can be an additional mechanism that contributes to that credulity. Further, the findings of my two studies provide implications and opportunities for future research on investors’ reactions to the characteristics of analyst forecasts, investors’ reactions to the likelihood of analyst herding, and the determinants of investors’ uncertainty judgments.

Graduation Semester

2012-12

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http://hdl.handle.net/2142/42123

Copyright and License Information

Copyright 2012 Walied Keshk

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