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Analyst forecast performance on banks: does experience matter?

Analyst forecast performance on banks: does experience matter? In this paper we investigate the relation between analysts' forecast performance and the opacity of a company; in particular, we compare analysts' forecast accuracy between Bank Holding Companies (BHCs) and non-financial companies. During the period of 1999 to 2004, forecast accuracy on banks is better than forecast accuracy on non-financial firms; however, analysts forecast accuracy for banks is significantly worse for the period of 2005 to 2008. In addition, while analysts' experience is positively associated with their forecast performance for non-financial firms, there is no evidence that experience improves forecast accuracy for BHCs. That is, BHCs are more difficult to understand during current crisis, and that prior experience does not help as much compared to non-financial firms. Our results suggest an increase in uncertainty risk for BHC's leading up to the recent financial crisis. Keywords: analysts forecast accuracy; analyst experience; bank holding companies. Reference to this paper should be made as follows: Du, L. and Huang, J. (2015) `: does experience matter?' American J. Finance and Accounting, Vol. 4, No. 2, pp.93­112. Biographical notes: Lijing Du is an Assistant Professor of Finance at Towson University, USA. Her research interests include empirical asset pricing anomalies, distress risk, and credit http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Journal of Finance and Accounting Inderscience Publishers

Analyst forecast performance on banks: does experience matter?

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Publisher
Inderscience Publishers
Copyright
Copyright © 2015 Inderscience Enterprises Ltd.
ISSN
1752-7767
eISSN
1752-7775
DOI
10.1504/AJFA.2015.072590
Publisher site
See Article on Publisher Site

Abstract

In this paper we investigate the relation between analysts' forecast performance and the opacity of a company; in particular, we compare analysts' forecast accuracy between Bank Holding Companies (BHCs) and non-financial companies. During the period of 1999 to 2004, forecast accuracy on banks is better than forecast accuracy on non-financial firms; however, analysts forecast accuracy for banks is significantly worse for the period of 2005 to 2008. In addition, while analysts' experience is positively associated with their forecast performance for non-financial firms, there is no evidence that experience improves forecast accuracy for BHCs. That is, BHCs are more difficult to understand during current crisis, and that prior experience does not help as much compared to non-financial firms. Our results suggest an increase in uncertainty risk for BHC's leading up to the recent financial crisis. Keywords: analysts forecast accuracy; analyst experience; bank holding companies. Reference to this paper should be made as follows: Du, L. and Huang, J. (2015) `: does experience matter?' American J. Finance and Accounting, Vol. 4, No. 2, pp.93­112. Biographical notes: Lijing Du is an Assistant Professor of Finance at Towson University, USA. Her research interests include empirical asset pricing anomalies, distress risk, and credit

Journal

American Journal of Finance and Accounting – Inderscience Publishers

Published: Jan 1, 2015

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