Do Analysts Herd? An Analysis of Recommendations and Market Reactions

40 Pages Posted: 16 Jan 2007

See all articles by Narasimhan Jegadeesh

Narasimhan Jegadeesh

Emory University - Department of Finance

Woojin Kim

Seoul National University - Business School

Multiple version iconThere are 4 versions of this paper

Date Written: December 29, 2006

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: Financial markets, Herding, Brokerage analysts, Analyst recommendations

JEL Classification: G14, G24

Suggested Citation

Jegadeesh, Narasimhan and Kim, Woojin, Do Analysts Herd? An Analysis of Recommendations and Market Reactions (December 29, 2006). Available at SSRN: https://ssrn.com/abstract=957192 or http://dx.doi.org/10.2139/ssrn.957192

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

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