Sell-side analysts and mutual fund managers: Complements or substitutes?
Haerang Park and
Byungmin Oh
Journal of Banking & Finance, 2025, vol. 176, issue C
Abstract:
We examine whether analyst coverage and mutual fund trades are complements or substitutes in the course of information incorporation into stock prices. Our empirical evidence indicates that they are complementary. Clustered trades in stocks with low analyst coverage is associated with a subsequent return reversal, which is more pronounced among less actively managed mutual funds. Mutual fund herding under low analyst coverage also amplifies future stock price crash risk through decreased corporate disclosure quality. These negative effects of mutual fund herding are not apparent for stocks with high analyst coverage. To address potential endogeneity concerns, we conduct additional tests using brokerage firm mergers and closures as exogenous shocks to analyst coverage and find consistent results. Our findings highlight the role of analysts in mitigating price-destabilizing herding behavior of mutual funds.
Keywords: Analyst coverage; Mutual fund; Herding; Complementarity; Price reversal; Crash risk (search for similar items in EconPapers)
JEL-codes: G14 G23 G24 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426625000664
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:176:y:2025:i:c:s0378426625000664
DOI: 10.1016/j.jbankfin.2025.107446
Access Statistics for this article
Journal of Banking & Finance is currently edited by Ike Mathur
More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().