Analyst herding – whether, why, and when? Two new tests for herding detection in target forecast prices

Callum Reveley, Savva Shanaev, Yu Bin, Humnath Panta, Binam Ghimire*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Downloads (Pure)

Abstract

This study proposes two novel tests for security analyst herding based on binomial correlation and forecast error volatility scaling and applies it to investigate herding patterns in analyst target prices in 2008-2020 in the UK. Analysts robustly herd in their valuations, with results consistent across years, sectors, in panel fixed effect, quantile, instrumental variable regressions, and when controlled for optimism and conservatism. Herding becomes prominent for stocks followed by at least five analysts and towards the long sides of Fama-French sorts, reinforcing its non-spurious and behavioral nature. Analyst herd more strongly subject to low volatility and uncertainty.
Original languageEnglish
Pages (from-to)25-55
Number of pages31
JournalEconomics and Business Review
Volume9
Issue number4
DOIs
Publication statusPublished - 28 Dec 2023

Cite this