NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Do Analysts Herd? An Analysis of Recommendations and Market Reactions

Narasimhan Jegadeesh, Woojin Kim

NBER Working Paper No. 12866
Issued in January 2007
NBER Program(s):   AP

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.

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Document Object Identifier (DOI): 10.3386/w12866

Published: Narasimhan Jegadeesh & Woojin Kim, 2010. "Do Analysts Herd? An Analysis of Recommendations and Market Reactions," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 23(2), pages 901-937, February. citation courtesy of

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