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

Authors

  • Callum Reveley University of Northumbria at Newcastle, United Kingdom
  • Savva Shanaev University of Northumbria at Newcastle, United Kingdom
  • Yu Bin Zhejiang University of Technology, Hangzhou, PR China
  • Humnath Panta School of Business, California State Polytechnic University, Humboldt, USA
  • Binam Ghimire Robert Gordon University, Scotland, United Kingdom

DOI:

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

Keywords:

behavioural finance, herding, econometric models

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 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 herd more strongly subject to low volatility and uncertainty.

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Published

2023-12-28

Issue

Vol. 9 No. 4 (2023)

Section

Research article- regular issue

License

Copyright (c) 2023 Binam Ghimire, Callum Reveley, Savva Shanaev, Humnath Panta, Yu Bin

Creative Commons License

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

How to Cite

Reveley, C., Shanaev, S., Bin, Y., Panta, H., & Ghimire, B. (2023). Analyst herding – whether, why, and when? Two new tests for herding detection in target forecast prices. Economics and Business Review, 9(4). https://doi.org/10.18559/ebr.2023.4.892

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