CHART OF THE DAY: Witness The Herding behaviour Of Wall Street's Analysts

One of the tasks of Wall Street’s equity analysts is to forecast earnings, which is more or less the culmination of all of their research and expertise.

And as this chart from Bank of America Merrill Lynch shows, analysts’ earnings estimates are increasingly in line with each other.

Some speculate that this is proof that they’re herding.

“The average estimate dispersion for S&P 500 companies currently sits at 10%, below the long-term average of 18%,” writes BAML’s Equity and Quant Strategy team led by Savita Subramanian. “This indicates that analysts remain clustered around consensus in EPS estimates, which we believe suggests a reluctance to diverge from the pack or rather than a strong conviction in earnings. Dispersion has remained in this narrow range of ~10- 15% since 2010.”

analysts earnings estimate

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