Who herds?

This paper develops a test for herding in forecasts by professional financial analysts that is robust to (a) correlated information amongst analysts; (b) common unforecasted industry-wide earnings shocks; (c) information arrival over the forecasting cycle; (d) the possibility that the earnings that analysts forecast differ from what the econometrician observes; and (e) systematic optimism or pessimism among analysts. We find that forecasts are biased, but that analysts do not herd. Instead, analysts "anti-herd": Analysts systematically issue biased contrarian forecasts that overshoot the publicly-available consensus forecast in the direction of their private information.