Do Analysts Herd? An Analysis of Recommendations and Market Reactions

40 Pages Posted: 24 Jan 2007 Last revised: 29 Aug 2010

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: January 2007

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.

Suggested Citation

Jegadeesh, Narasimhan and Kim, Woojin, Do Analysts Herd? An Analysis of Recommendations and Market Reactions (January 2007). NBER Working Paper No. w12866. Available at SSRN: https://ssrn.com/abstract=959139

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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