Herding In Analysts Recommendations
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Herding In Analysts Recommendations
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Author : Bart Frijns
language : en
Publisher:
Release Date : 2018
Herding In Analysts Recommendations written by Bart Frijns and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
This study investigates the impact of media on analysts' herding behavior when making stock recommendations. We find three main results. First, we find that analysts herd less when stocks are covered more in the media. Second, when the firm has negative media sentiment, analysts tend to herd more. Third, higher disagreement in the media is associated with a higher tendency to herd among analysts. These findings are robust to the confounding effect of news flows on returns as well as to alternative explanations. In addition, we find that the effect of media on the herding behavior is conditional on analyst characteristics.
Do Analysts Herd
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Author : Narasimhan Jegadeesh
language : en
Publisher:
Release Date : 2007
Do Analysts Herd written by Narasimhan Jegadeesh and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Investment analysis categories.
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.
Analyst Recommendations Mutual Fund Herding And Overreaction In Stock Prices
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Author : Nerissa C. Brown
language : en
Publisher:
Release Date : 2007
Analyst Recommendations Mutual Fund Herding And Overreaction In Stock Prices written by Nerissa C. Brown and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
This paper documents the tendency of mutual fund managers to follow analyst recommendation revisions when they trade stocks, and the impact of analyst revisioninduced mutual fund "herds" on stock prices. We find that mutual fund herds follow consensus revisions in analyst recommendations, controlling for common investment signals that affect both analyst revisions and mutual fund trading. Consensus upgrades result in herds of funds buying a stock, while consensus downgrades result in even bigger herds of funds selling. Our most important finding is that mutual fund herding impacts stock prices to a much larger degree during our sample period (1994 to 2003) than during prior-studied periods. Further, we find the first evidence that mutual funds appear to overreact when they herd in their trades - stocks heavily bought by herds tend to underperform their size, book-tomarket, and momentum cohorts during the following year, while stocks heavily sold outperform. These reversal patterns are even stronger when herds of mutual funds (especially funds with poor performance records) follow analyst recommendation revisions. An investment strategy that accounts for the direction of both analyst revisions and mutual fund herding generates a return (adjusted for size, book-to-market, and momentum) exceeding six percent during the following year. Our results remain robust when we condition fund herding on analyst earnings forecast revisions instead of recommendation revisions. Overall, our study finds that the interaction between sell-side analysts and mutual fund managers plays an important role in setting prices in equity markets.
Analyst Recommendations Mutual Fund Herding And Overreaction In Stock Prices
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Author : Nerissa C. Brown
language : en
Publisher:
Release Date : 2013
Analyst Recommendations Mutual Fund Herding And Overreaction In Stock Prices written by Nerissa C. Brown and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
This paper documents that mutual funds ldquo;herdrdquo; (trade together) into stocks with consensus sell-side analyst upgrades, and herd out of stocks with consensus downgrades. This influence of analyst revisions on fund herding is stronger for downgrades, and among managers with greater career concerns. These findings indicate that career-concerned managers are incentivized to follow analyst information, and have a greater tendency to herd on negative stock information, given the greater reputational and litigation risk of holding losing stocks. Further, during the more recent period (when aggregate mutual fund equity ownership is significantly higher), stocks traded by career-concerned herds of fund managers in response to analyst revisions experience a significant same-quarter price impact, followed by a sharp subsequent price reversal. Our evidence suggests that analyst recommendation revisions induce herding by career-concerned fund managers, and that this type of trading has become price-destabilizing with the increasing level of mutual fund ownership of stocks.
Herding Among Security Analysts
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Author : Ivo Welch
language : en
Publisher:
Release Date : 2001
Herding Among Security Analysts written by Ivo Welch and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with categories.
The paper shows that the buy or sell recommendations of security analysts have a significant positive influence on the recommendations of the next two analysts. This influence can be traced to short-lived information in the most recent revisions. In contrast, the influence of the prevailing consensus is not stronger if the consensus accurately forecasts subsequent stock price movements. This indicates consensus herding consistent with models in which analysts herd based on little information. The consensus also has a stronger influence when market conditions are favorable. The resulting poorer information aggregation could cause bull markets to be intrinsically more quot;fragilequot; (e.g., Bikhchandani et al., J. Political Economy 100(5) (1992) 992-1026).
Analysts Herding Propensity
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Author : Murugappa (Murgie) Krishnan
language : en
Publisher:
Release Date : 2007
Analysts Herding Propensity written by Murugappa (Murgie) Krishnan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
We model and estimate analysts' herding propensity with I/B/E/S annual earnings forecast data. Compared to prior studies, our paper has three unique features. First, we estimate analysts' true posterior beliefs of a firm's earnings assuming rational expectations rather than using analysts' own prior forecasts. Second, we estimate analysts' herding propensity at aggregate and the analyst levels rather than the forecast level. Third, we perform out-of-sample rather than in-sample tests on the usefulness of our herding propensity estimates. We document pervasive herding behavior. At the aggregate level, we find that herding propensity is positively related to forecast horizon and analyst coverage, but negatively related to analysts' general experience and brokerage size. At the analyst level, we find that about 75% (15%) of the analysts in our sample tend to herd (anti-herd). Moreover, our in-sample herding propensity estimates are useful in explaining the cross-sectional variation in analysts' out-of-sample herding behavior and forecast accuracy.
Herding Of Security Analysts On Stock Recommendations And Its Effect On Stock Returns
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Author : Sapol Pongthong
language : en
Publisher:
Release Date : 2014
Herding Of Security Analysts On Stock Recommendations And Its Effect On Stock Returns written by Sapol Pongthong and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Competition And Herding
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Author : Gali Ingber-Krauthgamer
language : en
Publisher:
Release Date : 2007
Competition And Herding written by Gali Ingber-Krauthgamer and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
Performance Herding And Career Concerns Of Individual Financial Analysts
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Author : Li, Xi
language : en
Publisher:
Release Date : 2002
Performance Herding And Career Concerns Of Individual Financial Analysts written by Li, Xi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
Using a new database of stock recommendations with substantially expanded coverage of brokerage firms and individual analysts, I examine the performance of portfolios recommended by individual analysts. The analysis allows a more accurate measurement of analyst performance with extensive risk adjustments. I show that at the aggregate level, analyst portfolios generate significant abnormal returns. Individually, a large number of analysts significantly outperform risk-adjusted benchmarks and there are at least twice as many analysts who significantly outperform as analysts who significantly underperform benchmarks. Abnormal performance is generated mainly within a narrow event window from two trading days before the recommendation date to five trading days later, with no significant post-event return drift. In addition, analyst performance improves with the number of recommendations issued, the number of stocks covered, and the size of their brokerage firms. However, performance declines as their coverage goes beyond 12-13 stocks. All-American analyst ranking of Institutional Investor cannot predict analyst performance. Moreover, analysts career concerns have significant impact on their behavior. Analysts with more reputation capital at stake recommend less risky portfolios and deviate less from the herd. Analyst behavior is also predictable on the basis of several other characteristics. Furthermore, I provide evidence for the current debate on how to reform analyst compensation. I find although the II all-star ranking is significantly related to performance, it is affected more by recognition factors and reputation factors. Its capacity to serve as a performance-based evaluation system for analyst compensation is quite limited.
Independent And Affiliated Analysts
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Author : Hao Xue
language : en
Publisher:
Release Date : 2018
Independent And Affiliated Analysts written by Hao Xue and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
The paper investigates strategic interactions between an independent analyst and an affiliated analyst in the context of issuing stock recommendations. Compared to the independent analyst, the affiliated analyst has superior information but faces a conflict of interest. I show that the independent analyst disciplines the affiliated analyst's biased forecasting behavior. Meanwhile, the independent analyst sometimes herds with the affiliated analyst to improve his recommendation accuracy. Because of the affiliated analyst's conflict of interest, the value the independent analyst expects to derive from his ex-post herding option is endogenous and can motivate him to acquire more information up front. As a result, herding and disciplining not only coexist but also mutually reinforce each other. That is, there is an endogenous complementarity between the independent analyst's ex-ante disciplining role and his ex-post herding behavior in equilibrium.