Do Analysts Herd? An Analysis of Recommendations and Market Reactions
46 Pages Posted: 25 Mar 2008
There are 4 versions of this paper
Do Analysts Herd? An Analysis of Recommendations and Market Reactions
Do Analysts Herd? An Analysis of Recommendations and Market Reactions
Do Analysts Herd? An Analysis of Recommendations and Market Reactions
Do Analysts Herd? An Analysis of Recommendations and Market Reactions
Date Written: January 2008
Abstract
This paper develops and implements a new test to investigate whether sell-side analysts herd around the consensus when they make stock recommendations. Our empirical results support the herding hypothesis. Stock price reactions following recommendation revisions are stronger when the new recommendation is away from the consensus than when it is closer to it, indicating that the market recognizes analysts' tendency to herd. We find that analysts from larger brokerages and analysts following stocks with smaller dispersion across recommendations are more likely to herd.
Keywords: herding, market efficiency, private information
JEL Classification: G14, G20, D82, D83
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Can Investors Profit from the Prophets? Consensus Analyst Recommendations and Stock Returns
By Brad M. Barber, Reuven Lehavy, ...
-
Security Analysts' Career Concerns and Herding of Earnings Forecasts
By Jeffrey D. Kubik, Amit Solomon, ...
-
By Patricia Dechow, Amy P. Hutton, ...
-
Analyzing the Analysts: When Do Recommendations Add Value?
By Narasimhan Jegadeesh, Joonghyuk Kim, ...
-
An Empirical Analysis of Analysts' Target Prices: Short Term Informativeness and Long Term Dynamics
By Alon Brav and Reuven Lehavy
-
How Do Analysts Use Their Earnings Forecasts in Generating Stock Recommendations?