Investor Herding and Price Informativeness in Global Markets: Evidence from Earnings Announcements

Tao Chen, Robert K. Larson and Han Mo

Journal of Behavioral Finance, 2024, vol. 25, issue 1, 92-110

Abstract: The authors examine whether herd activity promotes the efficient pricing of value-relevant information conveyed by annual earnings announcements. Using a global panel sample representing 35 countries, they find that price informativeness increases with herding effects around the time of the earnings disclosure. In addition, the positive herding-informativeness relationship is greater in countries with stronger legal systems and stronger political regimes. A series of robustness tests confirm these relationships. The study findings demonstrate that the tendency to herd plays a beneficial role in expediting information dissemination and reducing trader disagreement. This implies that this positive association is probably driven by the presence of investigative herding.

Date: 2024
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DOI: 10.1080/15427560.2022.2100380

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