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Analysts herding: when does sentiment matter?

Author

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  • Natividad Blasco
  • Pilar Corredor
  • Elena Ferrer

Abstract

Herding among analysts emerges when analysts give priority to their peers’ opinions instead of their own beliefs or information. Some circumstances may enhance or restrain this type of behaviour. We postulate that market sentiment is one of them. This article analyses the effect that investor sentiment may have on analysts’ herding behaviour in the U.K. Our results suggest that ‘easy situations’ such as analysing easy-to-value securities and releasing optimistic information at times of high market sentiment clearly reduce herding practices, whereas herding clearly increases in difficult situations when analysts have to release negative information at moments of high investor sentiment.

Suggested Citation

  • Natividad Blasco & Pilar Corredor & Elena Ferrer, 2018. "Analysts herding: when does sentiment matter?," Applied Economics, Taylor & Francis Journals, vol. 50(51), pages 5495-5509, November.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:51:p:5495-5509
    DOI: 10.1080/00036846.2018.1486999
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    Cited by:

    1. Reveley Callum & Shanaev Savva & Bin Yu & Panta Humnath & Ghimire Binam, 2023. "Analyst herding—whether, why, and when? Two new tests for herding detection in target forecast prices," Economics and Business Review, Sciendo, vol. 9(4), pages 25-55, December.
    2. G. Rejikumar & Aswathy Asokan-Ajitha & Sofi Dinesh & Ajay Jose, 2022. "The role of cognitive complexity and risk aversion in online herd behavior," Electronic Commerce Research, Springer, vol. 22(2), pages 585-621, June.
    3. Siniša Bogdan & Natali Brmalj & Elvis Mujačević, 2023. "Impact of Liquidity and Investors Sentiment on Herd Behavior in Cryptocurrency Market," IJFS, MDPI, vol. 11(3), pages 1-17, July.
    4. Xolani Sibande & Rangan Gupta & Riza Demirer & Elie Bouri, 2023. "Investor Sentiment and (Anti) Herding in the Currency Market: Evidence from Twitter Feed Data," Journal of Behavioral Finance, Taylor & Francis Journals, vol. 24(1), pages 56-72, January.
    5. I-Chen Lu & Kai-Hong Tee & Baibing Li, 2019. "Asset allocation with multiple analysts’ views: a robust approach," Journal of Asset Management, Palgrave Macmillan, vol. 20(3), pages 215-228, May.
    6. John Garcia, 2021. "Analyst herding and firm-level investor sentiment," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 35(4), pages 461-494, December.
    7. Bouri, Elie & Demirer, Riza & Gabauer, David & Gupta, Rangan, 2022. "Financial market connectedness: The role of investors’ happiness," Finance Research Letters, Elsevier, vol. 44(C).
    8. Chiang, Ming-Ti & Lin, Mei-Chen, 2019. "Market sentiment and herding in analysts’ stock recommendations," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 48-64.

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