<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>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.</p>
</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.

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

Economics and Business Review

This work is licensed under the Creative Commons Attribution 4.0 International License.

This study proposes two novel tests for security analyst herding based on binomial correlation and forecast error volatility scaling, and applies it to...

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

Published Online: Jan 26, 2024

Page range: 25 - 55

Received: Sep 10, 2023

Accepted: Dec 12, 2023

DOI: https://doi.org/10.18559/ebr.2023.4.892

Keywords
behavioral finance, financial econometrics, herding, stock analyst

© 2023 Callum Reveley et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

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

Published Online: Jan 26, 2024

Page range: 25 - 55

Received: Sep 10, 2023

Accepted: Dec 12, 2023

DOI: https://doi.org/10.18559/ebr.2023.4.892

Keywordsbehavioral finance, financial econometrics, herding, stock analyst

© 2023 Callum Reveley et al., published by Sciendo

This work is licensed under the Creative Commons Attribution 4.0 International License.

Keywords
behavioral finance, financial econometrics, herding, stock analyst