Do Analysts Herd? An Analysis of Recommendations and Market Reactions

Posted: 1 Feb 2010

See all articles by Narasimhan Jegadeesh

Narasimhan Jegadeesh

Emory University - Department of Finance

Woojin Kim

Seoul National University - Business School; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 4 versions of this paper

Abstract

This article 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, analysts following stocks with smaller dispersion across recommendations, and analysts who make less frequent revisions are more likely to herd.

JEL Classification: G14, G20, D82, D83

Suggested Citation

Jegadeesh, Narasimhan and Kim, Woojin, Do Analysts Herd? An Analysis of Recommendations and Market Reactions. The Review of Financial Studies, Vol. 23, No. 2, pp. 901-937, 2009. Available at SSRN: https://ssrn.com/abstract=1544189 or http://dx.doi.org/hhp093

Narasimhan Jegadeesh (Contact Author)

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States

Woojin Kim

Seoul National University - Business School ( email )

1 Gwanak-ro, Gwanak-gu
Seoul, 08826
Korea, Republic of (South Korea)
82-2-880-5831 (Phone)

HOME PAGE: http://cba.snu.ac.kr/en/faculty?mode=view&memberidx=60582&major=6

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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