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

Reveley Callum (), Shanaev Savva (), Bin Yu (), Panta Humnath () and Ghimire Binam ()
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Reveley Callum: University of Northumbria at Newcastle, Newcastle-upon-Tyne, NE1 8ST, United Kingdom
Shanaev Savva: University of Northumbria at Newcastle, Newcastle-upon-Tyne, NE1 8ST, United Kingdom
Bin Yu: Zhejiang University of Technology, Jianxing Building, 288 Liuhe Rd, Hangzhou, 310023, PR China
Panta Humnath: School of Business, SH 126, Cal Poly Humboldt, 1 Harpst St, Arcata, CA 95519, USA
Ghimire Binam: Robert Gordon University, Garthdee House, Garthdee Road, Aberdeen, AB10 7QB, Scotland, United Kingdom

Economics and Business Review, 2023, vol. 9, issue 4, 25-55

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 terms of 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.

Keywords: behavioral finance; financial econometrics; herding; stock analyst (search for similar items in EconPapers)
JEL-codes: C58 G23 G41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecobur:v:9:y:2023:i:4:p:25-55:n:1

DOI: 10.18559/ebr.2023.4.892

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